ECON 262

In Class Exercise Eight - The Supply Curve

1.   What are the variables in the supply function (what variables influence supply)?

2.  Graphically show what will happen to supply or quantity supplied in each case.  Assume ceteris paribus unless otherwise stated.  Only graph the supply curve!  Label axes correctly.

a.  What will happen to the supply of fish if the wages of fishermen increase? Hint:  You are the captain of the fishing boat and you have to hire fishermen to catch/supply fish.

b.  Assume milk and cream are complements in production.  What will happen to the supply of milk if the price of cream increases?

c.  Assume a new technology is introduced in the production of snowboards and at the same time the price of plastic (used to make snowboards) increased.  What will happen to the supply of snowboards?

d.  Assume skis and snowboards are substitutes in production.  What will happen to the supply of skis if the price of snowboards decreases?

e.  What will happen to the quantity supplied of gloves if the price of gloves increases?

f.  The government decides that all producers of chocolate must pay a tax per pound of chocolate produced.  What will happen to the supply of chocolate?

g.  The government decides to subsidize the production of corn ethanol.  What will happen to the supply of corn?

h.  The profitability of producing ale decreases relative to the profitability of producing lager.  What will happen to the supply of ale?  Make sure you can relate this to the concept of opportunity cost!

3.  Do you have any other questions over this material?