2.3 Supply Flashcards
Define individual supply
The supply of a good or service by an individual producer
What are the consequences of a left shift in supply?
- Price increases
- Quantity decreases
Define supply curve
A graph showing how the supply of a product varies with changes in its price
What is the consequence of a expansion in supply (for producers)?
- Initial increase in profits
- More firms enter the market, shifting supply to the right, reducing profits
What is a movement up the supply curve called?
Expansion in supply
Define supply
The willingness and ability of firms to provide goods and services at each price in a given time period
What is the consequence of a contraction in supply (for consumers)?
- Consumers can afford more
- Less choice
Define market supply
The total supply of a good or service found by adding together all individual producers’ supply
What are the consequences of a right shift in supply?
- Price decreases
- Quantity increases
What is a movement down the supply curve called?
Contraction in supply
What causes a shift in the supply curve?
Non-price factors (e.g. increase in costs of production, new technology, increase in taxes)
What is the consequence of a contraction in supply (for producers)?
- Decreased output
- Decreased profits (therefore less efficient firms are forced out)
What causes a movement along the supply curve?
Change in price
What is the consequence of a expansion in supply (for consumers)?
- Products are more expensive
- If more firms enter the market, shifting supply to the right, prices fall and consumers have more choice and can buy more products
Define price elasticity of supply
The responsiveness of quantity supplied to a change in the price of a product
