1.2.2 : Supply Flashcards
What is the basis law of supply ?
Is that as a the price of a product rises so businesses expand supply to the market
What does the costs of production mean?
Lower unit costs mean that a business can supply more at each price
Higher unit costs cause an inward shift of supply
What is a subsidy ?
Is any form of government support - financial or otherwise -offered to producers and consumers
What is supply ?
Supply is the quantity of a good or service that a producer is willing and able to supply onto the market at a given price in a given time period
What are the possible relationships on a supply graph ?
As price rises quantity supplied rises. Why - at higher prices firms are more likely to cover their costs. Chance of profits therefore increased.
As price decreases, quantity supplied falls. Why - at lower prices firms profit margins will be lower , if costs remain the same.
What are supply influencers ?
Cost of sales - suppliers charging more , external shocks , weather
Government policy (changing in taxation) - direct and indirect taxes
Competition
What ar direct and indirect taxes ?
Direct taxes are on individuals or businesses
Indirect taxes are on goods and services
What is increasing costs per unit ?
If the costs of producing a good or service increases , it will become more expensive to supply the product. This will lead to some firms decreasing supply.
What does increasing costs per unit do to a supply graph ?
Any influencer that increases costs per unit will lead to a new supply line. This will be shown by a short to the left from the original line.
What is decreasing costs per unit ?
If the cost of producing good or service decreases , it will become less expensive to supply the product. This will lead to some firms creasing supply.
What are some influencers that decrease costs per unit and lead to more supply from firms ?
Cost of sales - economies of scale , new technology , weather
Government policy - tax break (reduction in tax) , subsidies
Completion - if a consumer has less to choose from
What does decreasing costs per unit do to a supply graph ?
Any influencers that decrease costs per unit will lead to a new supply line. This will be shown as a shift to the right from the original supply line.
What is a short run ?
Are short term solutions to increase supply. The firm factors of production do not change drastically. Land , capital , labour
It equals small decisions like overtime for employees and more supples.
What is a long run ?
A long term solution is to increase supply. The firm factors of production do change drastically. Land
It equals to capital (they make major investment into equipment) and labour.
