2.2 Supply

Question 1

-Fixed Capital

Answer 1

A real, physical asset that is used in the production of a product, but is not used up in the production.

- Don’t change as you produce more
    - Ex: buildings

Question 2

-Variable resources

Answer 2

change as you produce more of a good or service

Question 3

• Producers are

Answer 3

people, companies, or countries that make, grow, or supply goods, services, or resources in a market

Question 4

-Supply is

Answer 4

the quantity of a good or service that producers are willing and able to offer at various prices during a specific time period;

Question 5

-Effective Supply:

Answer 5

producers can’t just be willing to produce a good or service, they must have the finances to be able to produce it.

Question 6

-Individual supply

Answer 6

is the supply of one product from one firm at every price

Question 7

market supply

Answer 7

is the sum of all the individual supplies of a product at every price

Question 8

law of supply

Answer 8

as the price of a product increases, the quantity of the supply will usually increase.

Question 9

Assumptions of law of supply:

Answer 9

• Ceteris paribus
• Law of diminishing marginal returns
• Increasing marginal costs of production (MGOP increases as output increases)

Question 10

Marginal returns

Answer 10

refers to the additional output gained from adding an additional unit of input to a production process.

Question 11

Marginal costs

Answer 11

is the cost of producing one more unit of a good.

Question 12

Law of diminishing marginal returns states that

Answer 12

adding more of one factor of production, while holding at least one other factor of production constant, will at some point yield lower marginal returns.

Question 13

-Total returns will

Answer 13

continuously increase until marginal returns are zero

Question 14

-When marginal returns are negative, then total returns

Answer 14

decline

Question 15

non-price determinants of supply

Answer 15

Factors that shift the entire supply curve

Question 16

Quantity supplied

Answer 16

refers to a specific quantity offered by producers at a specific price

Question 17

-Supply

Answer 17

refers to an entire supply curve of a good or service.

Question 18

Shift in a supply curve occurs

Answer 18

non-price determinents change

Question 19

Movement on the supply curve

Answer 19

price of good changes

Question 20

non-price determinants of supply

Answer 20

• change in cost of factors of production
• Firm tech
• Future expectation
• # of firms in the market
• business confidence
• Taxes and subsidies
• Natural disasters

Question 21

-Future expectation:

Answer 21

If firms expect prices of the products they sell to increase in the near future, they might withhold their current production (hoard) with hopes to sell at a higher price in the future.

Question 22

-Business confidence:

Answer 22

If producers expect the economy to do well, they will expect consumers to have more spending money, and that the consumption of goods and services will increase. This could cause them to increase supply.

Question 23

Joint supply

Answer 23

occurs when two or more goods are derived from the same product, so producing more of one would mean also producing more of the other.
- The second good is called the by-product

Question 24

Competitive supply

Answer 24

is when two goods are produced using similar resources and processes, so to supply more of one good means to produce less of the other.

Question 25

How do governments intervene in markets to change supply:

Answer 25

• Indirect taxes are taxes imposed on a good or service, and adds to the selling price.
• A subsidy is an amount of money granted by the government to a firm or industry
• Regulations are rules made by the government that require a certain behaviour of individuals, firms, etc.