2.3 The determinants of supply

Question 1

What is the market supply?

Answer 1

sum of all the supply of firms or producers in the market at different prices.

Question 2

What is the law of supply?

Answer 2

As the price increases, more is supplied

Question 3

What is profit and how can it be calculated?

Answer 3

Profit - the difference between sales revenue and costs of production.

Profit = sales revenue - costs of production

Question 4

What is revenue and how can it be calculated?

Answer 4

Revenue - money firm receives from selling its output

Revenue = price * quantity sold

Question 5

What factors will cause a shift in supply? (4)

Answer 5

Costs of production changing
Technological progression
Taxes imposed on firms
Subsidies (government grants)

Question 6

What 4 factors can cause a change in the costs of production? (4)

Answer 6

Wages
Raw material costs
Energy costs
Costs of borrowing

Question 7

What are direct taxes?

Answer 7

Direct taxes are imposed on income and profits

Question 8

What are indirect taxes?

Answer 8

Indirect taxes are levied on goods and services