1.2.4 Supply

Question 1

What is the definition of supply?

Answer 1

The quantity of a good/service producers are willing and able to produce at a given price in a given period

Question 2

What is the law of supply?

Answer 2

There is a direct relationship between price and quantity supplied. As price increases, quantity increases and vice versa, assuming ceteris paribus.

Question 3

What is it called when the supply moves up the demand curve?

Answer 3

Extension of supply

Question 4

If the price falls down the supply curve what is it called?

Answer 4

A contraction of supply

Question 5

Why is there a direct relationship between price and quantity supply?

Answer 5

Because of profit motive. Ifprice goes up for a good or service there is potentially more profit to be made of they can produce more and sell more.

Question 6

Why does price go up when quantity goes up?

Answer 6

Because when quantity goes up, cost of production is going up therefore, more money is needed

Question 7

What are the non-price factors that can increase supply?

Answer 7

Productivity (labour, capital etc)
Indirect tax (tax of production)
No. of firms
Technology (better tech=cheap)
Subsidy (grants of things)
Weather
Cost of production (transport, labour, oil, raw materials, regulation, utilities)