2.3 Supply Flashcards
Supply
The willingness and ability of firms to provide goods and services at each price in a given time period
Law of supply
The quantity supplied varies directly with the price
Why is the law of supply a thing (profits)
- Higher profits are likely to be earned if firms supply more
Individual supply
The supply of a good or service by a single producer
Market supply
The total supply of a good or service as a result of adding together all the individual supplies in the market
What causes a shift in the supply curve (6)
give examples for each point
- Cost of production- increased price in raw materials or wages
- Taxes and subsidies- An indirect tax would decrease supply as rise in cost of production.
- Technology- better technology that produces quicker and cheaper will increase the supply. e.g. mechanisation of farming
- Climate- If there is bad weather, agriculture production can go down
- Increase in the number of producers or size of firm- If there are more people supplying, it will shift to the right
- Government regulation- If they implement extra regulations that are hard to adhere to, supply goes down e.g. higher minimum wage
Consequences for firms when they supply more (3)
- Economies of scale- producing more at every price leads to fall in average costs
- Efficiency Can produce more with same resources
- Sales- Being able to supply more at a lower price would mean more sales
What is a movement along the supply curve
When the pice chages, leading to a movement up (expansion) or a movement down (contraction).
What would cause a movement along the supply curve
Changes in price
Which are caused by shifts of the demand curve.
If price rises, because of more demand, what will the supplier want to do
The supplier will want t supply more, so there will be a shift along the supply curve to a higher price and higher quantity
Consequences of shifts of the supply curve
- Quantity supplied will move the same way as price
What is the effect of an increase in supply due to a rightward shift in supply
Price falls and the quantity supplied increases
What is the effect of an decrease in supply due to a leftward shift in supply
Price will increase and quantity demanded will decrease.
What is the effect of decrease in quantity supplied due to a fall in price (leading to a movement down the supply curve)
Both price and quantity supplied will fall
What is the effect of quantity supplied increasing due to a rise in price (leading to a movement up the supply curve)
Both the price and the quantity supplied will increase
