1.2.4 Supply

Question 1

Supply

Answer 1

Supply is the ability and willingness to provide a good or service at a particular price at a given moment of time

Question 2

Upward sloping

Answer 2

-If price increases, it is more profitable for firms to supply the good, so supply
increases.
-High prices encourage new firms to enter the market, because it seems
profitable, so supply increases.
-With larger outputs, firm’s costs increase, so they need to charge a higher
price to cover the costs.

Question 3

1. Productivity - factors that shift supply curve

Answer 3

If productivity (i.e. better educated workforce) of factors production increase, this will lead to a fall in production costs as there is higher productive efficiency. Firms can produce more for the same price - shift supply right

Question 4

2. Indirect taxes - factors that shift supply curve

Answer 4

If the government increases indirect tax (a tax paid by a supplier on units of a good/service sold) supply of a good/service will decrease - shift supply left

Question 5

3. Number of firms - factors that shift supply curve

Answer 5

The larger the number of firms in the market for a given good/service, the greater overall supply - shift supply right

Question 6

4. Technology - factors that shift supply curve

Answer 6

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 produce more for the same price - shift supply right

Question 7

5. Subsidies - factors that shift supply curve

Answer 7

If the government provides a subsidy (a payment to lower the cost of production) to a firm, the firm will be able to use its increased resources to increase output. Therefore, overall supply into the market will increase - shift supply right

Question 8

6. Weather - factors that shift supply curve

Answer 8

For agricultural goods, supply is dependent on the weather (i.e. wheat), good weather more wheat is produced - shift supply right

Question 9

7. Costs of production - factors that shift supply curve

Answer 9

If costs of production increase, suppliers will have to put up their prices to avoid making a loss, so less is supplied at each price - shift supply left