Question

Deriving the Market Supply Curve from

Individual Supply Schedules (Student Survey)

Discussion: Post and Reply

PART I.

This is the first step of several steps of our economics project. In this first step, we will assess the market for frozen yogurt. You will read about the economic setting and you will post the quantity you would supply to the market at specific hypothetical prices. (Hint: you will want to think on the margin for this one!)

After Thursday, when everyone's posts become visible, we will observe the market supply. I will inform you what the market demand looks like and we will establish the equilibrium price.  

You have moved to a new community and as someone who is always on the look out for a good opportunity, you observe that the new town you live in has no frozen yogurt venues. You have reason to believe that there will be solid demand for your service and you decide to open up a small shop that sells cups of frozen yogurt in this city. The market is big enough to accommodate you.

You have already paid for 1 month's rent ($3000) and your commercial property landlord is allowing you to lease the space on a month- to- month basis. There are 30 days this month.

You own three frozen yogurt machines already and a commercial-grade refrigerator/freezer (they were gifts from your rich uncle who just wants you to succeed).

You observe that the cost of the yogurt mix, cones, cups and sprinkles and the imputed cost of utilities cost you $0.50/cup.

Also, labor can generate the following output(s):

Labor (# of employees hired)/day	Output Produced/day
0	0
1	100
2	190
3	260
4	290
5	310
6	320

POST (1) The name of your business AND more importantly (2) state the quantities of frozen yogurt you would willingly supply to the market at each of the following (specific) prices given that you can only hire labor for the entire day (ie, 8 hours/day shifts and the daily salary is $80/worker). You have already paid the first month's lease. Today is the start of the month.

Price	Quantity Supplied Per Diem (Your Responses)
$1.00	?
$1.30	?
$1.40	?
$1.50	?
$1.65	?
$1.85	?
$2.00	?
$2.25	?
$2.50	?

Answer 1

Computing in excel, on per day basis,

And as its the initial phase of business, we wish to break even with the quantity supplied/sold. Thus we take

VC/ per day = TR/ per day

Thus, as highlighted in the cell is the optimal amount of quantity sold to break even at that price.

Price	Quantity Supplied Per Diem (Your Responses)
$1.00	0
$1.30	100
$1.40	190
$1.50	260
$1.65	290
$1.85	310
$2.00	320
$2.25	320+
$2.50	320+