1.2.4 price elasticity of demand

Question 1

What is the definition of supply?

Answer 1

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.

Question 2

How can supply be affected by costs of production?

Answer 2

If the cost of production increases, profit will decrease, leading to a fall in supply.

Question 3

How can supply be affected by new technology?

Answer 3

More efficient production techniques can lead to cost savings, allowing lower cost businesses to increase supply.

Question 4

How can supply be affected by indirect taxes?

Answer 4

If a tax on a good or service (e.g., VAT) increases, it raises costs for the producer, likely reducing their supply.

Question 5

How can supply be affected by government subsidies?

Answer 5

Money given to a business by the government can encourage the business to produce more supply.

Question 6

How can supply be affected by external shocks?

Answer 6

The supply of certain products may decrease while the supply of more essential products for the situation increases.