1.9 Supply Flashcards
What is revenue?
Revenue is the income that a company or government generates
How do you calculate total revenue?
Price x quantity
What is supply?
Supply is the quantity of a good or service that firms are willing to sell at a given price over a given time period
What is the law of supply?
Ceteris paribus, as the price of a good increases, the quantity supplied increases and as the price of a good decreases, the quantity supplied also decreases
What does the supply curve assume?
- Firms are motivated to produce by profit
- The cost of producing a unit increases as output increases
Why does it slope upwards from left to right?
This is because an increase in price will also lead to an increase in supply and the quantity produced
What does an increase in price lead to and how is it represented on a supply curve?
An increase in price leads to an extension in supply. It shows MOVEMENT along the curve to the RIGHT
What does an decrease in price lead to and how is it represented on a supply curve?
A decrease in price leads to a contraction in supply. MOVEMENT along the curve to the LEFT
What are the factors that cause the supply curve to SHIFT?
PINTSWC
Productivity
Indirect taxes
Number of firms
Technology
Subsidies
Weather
Costs of production
How does productivity affect the supply curve?
Higher productivity causes an outward shift because average price for the firm declines
How do indirect taxes affect the supply curve
Inward shift in supply as it causes production cost to increase
Why does the number of firms in a market affect the supply curve?
If there are more firms in a market, there are likely to be more firms producing the same good. This increases the amount of the good available.
The supply curve will shift right
How does an advancement in technology affect the supply curve?
It causes an outward shift as production would become more efficient, quicker and cheaper
How do subsidies affect the supply curve?
Subsidies can cause an outward shift in supply as the cost of production would be lower
How does the weather affect the supply curve
Favourable weather conditions will increase supply and shift to the right
