1.3.2 Supply Flashcards
What is individual supply
The supply that a producer is willing & able to sell at a given price in a given period of time
What is market supply
The sum of all individual supplies in a market
What is joint supply
When increasing the supply of one good causes an increase/ decrease in the supply of another good
E.g. producing more lamb would increase the supply of wool
What is composite supply
Occurs when a good or service can be obtained from different sources
E.g. light can be obtained from candles, electricity & gas
What is competitive supply
If the raw materials producing the good in composite supply are perfect substitutes of each other
E.g. if electricity & candles were substitutes & cost the same to produce, they would compete to produce the good, light
Reasons why the supply curves are upward sloping
- 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
What are the factors that shift supply curve ( there are 7)
PINTSWC ( productivity, indirect taxes, number of firms, technology, subsidies, weather, costs of production)
How does productivity affect supply
Higher productivity causes an outward shift in supply, because AC for the firms fall
How does indirect taxes affect supply
Inward shift in supply
How does the number of firms affect supply
The more firms there are, the larger the supply
How does subsidies affect supply
Causes an outward shift in supply
How does weather affect supply
This is particularly for agricultural produce; favourable conditions would increase supply
How does costs of production affect supply
If costs of production fall, the firm can afford to supply more. If costs rise, such as with higher wages, there will be an inward shift in supply.
depreciation in the exchange rate will increase the cost of imports, which will cause an inward shift in supply.
How does technology affect supply
The more advanced the technology causes an outward shift in supply
