1.2.4 Supply

Question 1

What are the main determinants of supply (the supply curve)?

Answer 1

• Cost of production
• Favourable weather conditions
• The entry of a new producer into the market
• Improvements in technology
• Taxes, subsidies and government regulations

Question 2

What does a point on the supply curve show?

Answer 2

A point on the supply curve shows the quantity of a product supplied at a given price

Question 3

What would cause a movement along the supply curve?

Answer 3

A movement would be caused by a change in price

Question 4

What would cause a shift in the supply curve?

Answer 4

A shift would be caused by a change in the cost of production or any of the determinants

Question 5

Give an example of something that would shift the supply curve of oil to the right

Answer 5

If a new producer entered the market to challenge BP, Shell etc. then the overall supply of oil in the market would increase because they are supplying oil as well as the other businesses causing a shift to the right

Question 6

Give an example of something that would shift the supply curve of oil to the left

Answer 6

If the cost of fracking (retrieving the oil from the ground) increased because they have to move to a new location where the oil is harder to extract then the supply curve would shift to the left