2.3 Supply Flashcards
What is supply?
The ability and willingness of a firm to provide goods and services at each price in a given time period.
What is the law of supply?
The quantity supplied generally varies directly with the price.
Why does the supply curve slope upwards?
Because firms are likely to gain higher profits when they supply more. Production costs are likely to rise as more is produced.
What is individual supply?
The supply of a good or service by an individual producer.
What is market supply?
The total supply of a good or service found by adding together all individual producers’ supplies.
What are shifts along the supply curve?
A complete movement of the existing supply curve either to the right (more supply) or to the left (less supply).
What are factors that cause a shift in the supply curve?
PINTSWC
- Productivity
- Indirect taxes
- Number of firms
- Technology
- Subsidies
- Weather
- Costs of production
What is a subsidy?
An amount of money a government gives directly to firms to encourage production and consumption.
For shifts along the supply curve, what is the correlation between price and quantity?
Price and quantity will move in opposite directions. So, if supply shifts to the right, price falls while quantity increases.
What are consequences of rightward shifts in supply?
1) Can gain economies of scale as more output leads to a fall in average costs. This results in a lower price for consumers and higher profits.
2) Increased efficiency and possibly greater productivity.
3) Increased sales due to fall in prices causing consumers to buy more.
What are other consequences of shifts in supply for competiton?
1) Greater economies of scale make firm more competitive and increase exports.
2) When firms are more competitive, they gain market share and can become oligopolies or monopolies.
What are movements along the supply curve?
When the price changes (due to a change in demand) leading to a movement up or down the existing supply curve.
How are movements along the supply curve shown?
Expansion of supply = movement up the curve.
Contraction of supply = movement down the curve.
For movements along the supply curve, what is the correlation between price and quantity?
Price and quantity move in the same direction.
If prices rise in supply, how does it affect the consumers and producer?
Movements + Consqequences.
If prices rise that means quantity rises too. Initially, firms will make a profit. After, more firms may enter the market shifting supply to the right, however this may reduce profit. Consumers have more choice and can buy more products.
