1.2.4 Supply

Question 1

Define supply

Answer 1

The quantity of a good or service that firms are willing to sell at a given price over a given period of time

Question 2

What causes movements along the supply curve

Answer 2

A change in price

Question 3

What causes shifts of the supply cause

Answer 3

Changes in the conditions of supply
- changes to costs of production
- improvements in tech
- changes to productivity of factor of production
- numbers of suppliers in a market
- indirect taxes and subsidies
- changes to prices of other good

REF TO PAGE 22/23 CGP

Question 4

What is the law of supply

Answer 4

Ceteris Paribus, as the price of a good increases, quantity supplied increases; conversely as the price of a good decreases, quantity supplied decreases
- this is because at a higher price, suppliers would earn a greater profit margin per unit sold

Question 5

What does the supply diagram assume

Answer 5

1) firms are motivated to produce by profit
2) the cost of producing a unit increases as output increase

Question 6

Why does the supply curve slope upwards from left to right

Answer 6

As price increases, quantity supplied increases because at higher price, profit margin earned per unit is greater and firms want to maximise profit

Question 7

How does number of firms in a market affect supply

Answer 7

More firms in a market means greater competition and therefore supply increases (rightwards shift in s curve)