3 - Supply Flashcards
Define ‘supply’
Quantity of good/service which producers choose to sell at any price in a given time period.
Define ‘firm’
Organisation that brings all factors of production together to produce output
Factors/conditions of supply
Number of firms in the market
Other factors
Government policies
Price of other substitutes
Expectation about future prices
Cost of production
Technology
List the factors of production and their output
Land - rent
Labour - wage
Capital - interest
Enterprise - profit
Define ‘indirect tax’
Tax levied on expenditures of goods and services.
Define ‘subsidy’
Grant given by the government to encourage production of goods or services.
Factors of elasticity of supply
Government regulation
Technology
Availability and cost of switching resources from one to another
Spare capacity
Time period
Stocks
Define ‘long run’ + ‘short run’
Long run: where factors of production can be varied
Short run: at least one factor of production is fixed
Define ‘market equilibrium’
Situation which quantity of a good or service that is being supplied is equal to the quantity that is being demanded by consumers at current price.
Define ‘marginal cost’
The cost of producing an extra output.
Define the ‘rationing’ function
Situation where supply is scarce yet high demand. Supply of good will be rationed to those who are able to pay the higher price.
Define ‘derived demand’
Demand for a good or service that arises from the demand for another related good and service.
Define ‘consumer surplus’ + ‘producer surplus’
Consumer surplus: difference between what consumers are willing to pay and what they actually paid.
Producer surplus: difference between the price of good firms are willing to receive and the price they actually receive.
Define ‘direct tax’
Tax levied directly on someone’s income
Define ‘excise duty’
Tax levied on goods or services to discourage their consumption.
