2.2 SUPPLY

Question 1

Supply

Answer 1

The quantity of a good or service that producers cand and want to offer at various prices during a specific time period.

Question 2

Law of Supply

Answer 2

The relationship between price and quantity supplied is direct. (As the price of goods rises, the quantity supplied will usually rise due to the opportunity for profit.)

Question 3

Law of Diminishing Marginal Returns

Answer 3

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. (Too many cooks in the kitchen so must charge more because returns decrease.)

Question 4

Increasing Marginal Cost of Production

Answer 4

Producers will want to increase the quantity supplied if they could receive higher price in the market for selling the product. Signifies they must charge a higher price if they want to make more.

Question 5

Change in Quantity Supplied

Answer 5

Any change in the price of a product moves along the supply curve.

Question 6

Change in Supply

Answer 6

When something other than price has caused a change to the supply curve. (When the entire supply curve shifts.)

Question 7

Name the 6 Shifter of Supply

Answer 7

1. Cost of Resources/Input
2. Technology
3. Number of Firms/Sellers
4. Future Expectations
5. Price of Related Goods
6. Government Intervention

Question 8

Related Goods

Answer 8

Producers have a choice as to what good to produce when the supply of a good changes.

Question 9

Joint Supply

Answer 9

When two or more goods are derived from the same resource so that it is not possible to produce more of one without producing more of the other. (The second good is called a by-product.)

Question 10

Competitive Supply

Answer 10

When the production of two goods uses similar resources and processes. (As a supplier produces more of one good, they produce less of the other.)

Question 11

Government Intervention

Answer 11

Governments intervene in markets to change supply to achieve goals associated with the price or quantity of goods in markets.

Question 12

List 3 Common Ways Governments Intervene

Answer 12

1. Taxes (Indirect)
2. Subsidies
3. Regulation

Question 13

Taxes (Indriect)

Answer 13

A tax imposed on a good or service. (When indirect taxes are imposed or increased, the costs of production for firms increase, causing supply to decline.)

Question 14

Subsidies

Answer 14

Money granted to a firm or industry by the government. (When the government gives a subsidy to a firm it reduces the firm’s costs of production, increasing the supply.)

Question 15

Regulation

Answer 15

A rule made by the government that requires certain behavior of individuals, firms, or other groups. (The rules and requirements usually increase the costs of production for firms.)