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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
- 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
- Multi Mixers - variable
- Insta-Mix - variable
- Building - fixed
- beef patties - variable
- potatoes for french fries - variable
- Foot lettuce - variable
- electricity - variable
- labor power - variable
- Freezer room - fixed
- Security system - fixed
- toppings for burgers - variable
- Forks & Knives - Variable
- Soda - Variable
- Tables, Chairs - Fixed
- Location - Fixed