4. Supply Flashcards
supply
quantity of a good or service that a producer is willing and able to supply at different PRICE POINTS at a given time
law of supply
as the price of a product rises, the quantity supplied will usually increase ceterus pareibus
non price determinants of supply
ROTTEN
Resource costs (factors of production)
O- Other goods’ prices
(substitutes in production &
competitive or joint production)
T- Technology changes
T- Taxes & subsidies
E- Expectations of Producers
N- Natural Disasters and Weatherwhy is the supply curve upward sloping
Increasing marginal costs
At higher quantities the factors of production grow scarce
R as a non price determinant of supply
RESOURCE COSTS
a fall in FOP costs - increases supply, rightward shift
an increase in FOP costs - decreases supply, leftward shift
O as a non price determinant of supply
OTHER GOODS COSTS-
- competitive supply: decreases S in one when increasing S for the other
- joint supply: decreases S for both
T1 as a non price determinant of supply
TECH CHANGES
improvements in tech –> increase in supply, rightward shift
leftward shift (unlikely)–> natural disasters
T2 as a non price determinant of supply
TAXES AND SUBSIDIES
-indirect tax = rise in COPs–> increase P by amount of tax = decrease Qs at each P –> decrease in S (shifts upward and to the left)
- subsidies= reduce COPs–> shift supply downwards by amount of subsidy –> more supplied at each price
E as a non price determinant of supply
EXPECTATIONS OF PRODUCERS
- producers who expect D for good to rise in the future - higher D = higher P so they withhold the product so they can supply more later
- if D is expected to fall - producers will reduce Qs
N as a non price determinant of supply
NATURAL DISASTERS AND WEATHER
especially for agriculture
- good conditions –> bumper crop (weirdly good harvest) –> increased/excess supply
- bad conditions –> reduced supply
joint supply
goods that are produced together (by products)
eg. lamb and wool, diesel and petrol, molasses and sugar
competitive supply
alternative uses for the same factors of production (opportunity costs!)
eg. skateboards and roller skates, land to grow food or land for biofuels
change in price of a good is….
a movement along the existing supply curve
a change in any other determinants is..
a shift of the supply curve to the right or left
how to find market supply
add individual producer supply at a given price altogether - horizontal summing of the supply schedule
