2.2 supply

Question 1

supply

Answer 1

quantity of goods/services a firm is willing and able to produce and supply to the market for sale at different price points, ceteris paribus

Question 2

law of supply

Answer 2

increase in price = quantity supplied increases & vice versa.

Question 3

non-price determinants causes…

Answer 3

change in supply

shift of the supply curve

Question 3

price determinants causes…

Answer 3

change in quantity supplied

movement along the supply curve

Question 4

competitive supply

Answer 4

(Goods in competitive supply are alternative products a firm could make with its resources. E.g. a farmer can plant potatoes or carrots.)

Question 5

joint supply

Answer 5

these goods are produced TOGETHER from the same origin

Question 6

explain how the supply curve for meat could be influenced by…

1) higher price of cereal grain (to feed the livestock)

2) a subsidy offered to producers by the government

3) increase in the price of leather

Answer 6

1) - supply curve shift to the left
- non-price factor of cost of production → cop increases

2) - supply curve shift to the right
- decrease in the cost of produce

3) (For example, to produce leather, ranchers also produce beef. An increase in the price of leather (Product A) incentives ranchers to increase the number of cows in their herds which leads to a raise in the production of beef (Product B), shifting the supply curve to the right.)

Question 7

Explain how the supply curve for bananas could be influenced by

1) an increase in its price

2) an increase in the price of apples

3) an increase in the price of fertilisers

Answer 7

1) movement up the supply curve

2) - if apples and bananas are produced in the same firm → would put more resources into producing apples because higher income from it → decrease in the supply of bananas & shift of supply curve to the left
- competitive supply ^

3) supply curve shifts to the left → cost of production increased

Question 8

explain this example of competitive supply

example: assume you are the land developer

the price of residential buildings increases…

Answer 8

• the price of residential building increases
• quantity supplied of residential building increases
• supply of commercial building decreases
• supply curve shifts to the left

Question 8

How will the following affect supply of milk?

• an increase in the cost of hay
• a new technology reducing the amount of time it takes to raise a cow
• an increase in the price of leather
• increased indirect tax on the milk
• government subsidies for farmers
• shutdown 30% of the farms
• mad cow disease
• expecting milk to have a price spike of 200% in 2 months

Answer 8

1. decrease - cop increase
2. increase - cop dec due to tech
3. increase - joint supply
4. decrease - cop inc
5. increase - cop dec
6. decrease - no. of suppliers dec
7. decrease - sudden event
8. decrease - price expectation

Question 9

example of joint supply

Answer 9

sheep products: wool, milk, lamb, leather, sheep oil