1.2.2 supply Flashcards
what is supply
the total amount of product that producers and firms are willing to sell at a given price
what factors will affect supply
-change in the cost of production
-new technology
-government subsidies
-change in indirect taxes
-external shocks
what are some changes in the cost of production
-change in wage costs
-change in the price of raw materials
-change in the cost of overheads
how will a higher price of raw materials affect supply
it will increase the cost per unit of every product, this means a business wont be able to supply as much for the same price as they used to, they can either spend more to buy the materials or decrease the supply
how will a change in wage cost affect supply
it will increase a businesses variable costs, this will lead to a decrease in the amount spent on materials and therefore lead to less supply being made
what is the general rule for businesses when working out how much to supply
the more profit they can make when supplying a product, the more they will be willing to supply
true or false, the introduction of new technology will increase supply
true
how will the introduction of new technology affect supply
it will increase it.
-new machinery can increase how much product is made
-new technology can increase capacity of a product
-will reduce business costs
what is a government subsidie
a payment from the government to businesses to stimulate econmomic activity
why will a government subsidies increase supply
it will reduce a businesses costs, this means they will have more money to spend on raw materials and ultimately leading to more products being made ands supplied.
examples of businesses which are given government subsisides?
solar panel companies
wind turbine companies
-by giving subsidies to these sort of companies, more products can be made, these businesses help the environment by using renewable resources, so it helps the economy as a whole
what is an indirect tax?
taxes that are put onto certain goods by the government
why will indirect taxes affect supply
an increase in taxes on products will lead to an increase in business costs, therefore decreasing the amount of products supplied by that business.
what is the law of supply
as product price increases, the amount supplied will increase
does price and quantity have a positive or negative correlation when it comes to supply?
positive, as price goes up quantity goes up
