1.2.4 - Supply

Question 1

Whats is supply ?

Answer 1

Supply id the amount of goods/services that a producer is willing and able to supply at a given price in a given time period.

Question 2

Draw a contraction and extension on a supply curve.

Answer 2

Question 3

What’s the relationship like between price and supply.

Answer 3

The supply curve is sloping upward as there is a positive relationship between price and quantity supplied.
- Rational profit maximising producers would want to supply more as prices increase in order to maximise their profits.

Question 4

What are the mnemonic for factors that affect supply (non-price)?

Answer 4

P - Productivity
I - Indirect taxes
N - Number of firms
T - Technology
S - Subsides
W - Weather
C - Cost of prodcution

Question 5

Productivity

Answer 5

Productivity is out put per worker. So if we can make more with the same or less resources we are being productive. This will shift the supply curve to the right

Question 6

Indirect Taxes

Answer 6

Direct taxes are on what you earn. Indirect taxes are on what you spend. An increase on these (Eg. petrol, alcohol) leads to producers supplying less and vice versa.

Question 7

Number of firms

Answer 7

If there are more firms, there is more supply. If new entrance join a market it will shift the supply curve to the right.

Question 8

Technology

Answer 8

If new technology is introduced then it will lead to a fall in production
costs as there is higher productive efficiency. This will encourage firms to lower
prices or produce more goods for the same price and so the curve will shift to the
right. During war or natural disasters, companies may have to use less efficient
technology so the supply curve will shift to the left as they produce less at each price.

Question 9

Subsides

Answer 9

Question 10

Weather

Answer 10

For some goods, particularly agricultural goods, the supply is dependent on weather e g. if the weather is good, more wheat will be produced so the curve will shift to the right. If the weather is bad, the producers won’t be able to supply as much wheat and so it will shift to the left.

Question 11

Cost of production

Answer 11

If a business has in an increase in their costs but their selling price stays the same, they will make less money on what they sell. They will put up their prices in order to avoid making a loss and so less is supplied at each price, meaning the supply curve will shift to the left. If they have a decrease in their costs, then it will shift to the right.