Economics/feb26-elastic-supply.md

February 26 Notes

Elasticity of Supply

• Inversely proportional to production cost
  • high production costs take longer to switch
• Larger over time

Shifts in the Supply Curve

• Happen when something other than price changes

Examples:

• Cost of Inputs ie: labor
• Changes in policies, taxes, regulations, subsidies
• Number of firms
• Technological advancements
• Natural disasters
• Change in the market ie: expectations

Short run vs. Long run, Fixed vs. Variable Inputs

• Fixed input cannot be changed in the short run ie: infrastructure
• Variable input can be changed quickly ie: resources bought
• Short run is the period of time when at least one input is fixed
• Long run is when all inputs become variable

Examples:

• Fixed:

  • Building for a university
  • Cars for a taxi service
  • A new Ford factory
  • A new hydroelectric power plant

• Variable:

  • Books for a Library
  • Sandwich meat for Jersey Mikes
  • Cooks at a restaurant

Inputs for a fast food restaurant:

1. Multi Mixers - variable
2. Insta-Mix - variable
3. Building - fixed
4. beef patties - variable
5. potatoes for french fries - variable
6. Foot lettuce - variable
7. electricity - variable
8. labor power - variable
9. Freezer room - fixed
10. Security system - fixed
11. toppings for burgers - variable
12. Forks & Knives - Variable
13. Soda - Variable
14. Tables, Chairs - Fixed
15. Location - Fixed