3.3 The determinants of the supply of goods + services

Question 1

what does a supply curve show

Answer 1

the relationship between price and quantity supplied

Question 2

how will a rise in price effect the supply

Answer 2

increase, higher price means higher profit, so producers will supply more, so the supply curve points up

Question 3

what are the seven factors that cause the supply curve to shift CARPETS

Answer 3

Costs
Acts of god 
Regulation 
Price of other goods 
Expectation 
Taxes (indirect)

Question 4

why do costs shift the supply curve

Answer 4

if costs of production increase then its more expensive to produce the goods so the supply curve will shift left, this can happen from paying workers higher wages, or rising materials costs
if costs of production decrease then the curve will shift right, this can happen from technological improvements or increased labour productivity

Question 5

how do acts of god shift the supply curve

Answer 5

natural disasters like earth quakes which reduce the supply will shift the supply curve left

Question 6

how does regulation shift the supply curve

Answer 6

new laws tend to increase costs - hence shifting supply curve left. governments can also restrict output eg fish quotas

Question 7

how does the price of other goods shift the supply curve

Answer 7

if a good in competitive supply has a higher price then the producer will produce more of the other good so the supply of good b will decrease, shifting the supply left

Question 8

how can expectation shift the supply curve

Answer 8

producers may withhold supply if they think they can sell if for more in the long run, shifting supply to the left

Question 9

how can indirect taxes shift the supply curve

Answer 9

indirect taxes are charged to firms so they increase the costs of production, shifting the curve left