1.3.3 The determinants of the supply of goods and services Flashcards
law of supply
states as price increases, the quanitity supplied will increase
shifts of supply
- conditions of supply
- technology
- product subsidies
- taxes on businesses
- productivity of labour
- production costs
shifts of supply
conditions of supply
factors other than price that lead to change in position of supply curve
shifts of supply
technology
imrpovements may lead to increased productivity of firms
shifts of supply
product subsidies
gov grants to firms to encourage greater production
shifts of supply
taxes on businesses
- VAT
- exercise duties
- business rate
shifts of supply
productivity of labour
output per worker per hour - affected by amount of training + quality of capital equiptment
shifts of supply
production costs
wage, costs, raw material costs, rent, interest of borrowing
determinants of PES
- time taken to expand supply
- size of spare capacity
- avalible stocks
- ease of switching production
determinants of PES
time taken to expand supply
if difficult or time consuming to increase production, then supply tends to be more £ inelastic
determinants of PES
size of spare capacity
firms with machinery, factory space or labour thats not fully utilised will be more able to expand production in SR
therefore supply = more price elastic
determinants of PES
avalible stocks
firms with stocks of finished or partly stock will be able to respond relatively quickly to £ increase so supple + more price elastic
determinants of PES
ease of switching production
if firms can easily adjust use of factors of production to respond to price change, supply = £ elastic.
highly specialised equiptment + employees = relatively £ inelastic
a supply curve shows
the relationship between price and
quantity supplied.
higher prices imply…
higher profits and that this will provide the incentive to expand production
