4. Supply

Question 1

Supply

Answer 1

the amount of goods and services that producers are willing and able to sell at a certain price over a certain period of time

Question 2

Increase in P =
Increase in S =

Answer 2

(decrease in D) = increase in S
(decrease in D) = decrease in P

Question 3

Determinants of supply

Answer 3

1) price – number 1 determinant – movement along the S curve
2) non-price determinants – a shift of the S curve
- the cost of production, the price of related goods, government intervention, expectations of future P, change in technology, weather conditions

Question 4

cost of production

Answer 4

• raw materials, wages/salary, transportation, manufacturing, taxation…
• TC increase, S decrease, P increase, Qd decrease

Question 5

types of related products

Answer 5

i) competitive supply
– TC increase = increase in P
ii) joint supply
– TC increase = decrease in P

Question 6

c) government intervention

Answer 6

• subsidies, taxes, regulations, price controls…
• tax/ceiling price = increase in TC = decrease in S = increase in P = decrease in Qd
  (once the control is removed P skyrocketing)
• subsidy = decrease in TC = increase in S = decrease in P = increase in Qd

Question 7

d) expectations of future P

Answer 7

producers: decrease in S now – increase in S in the future
consumers: expecting higher P = increase in D – increase in P

Question 8

e) change in technology

Answer 8

• in theory only
• improvement = TC decrease = P decrease

Question 9

f) weather conditions

Answer 9

agricultural commodities ->
bad weather = increase in TC and v.v. (natural disasters)

Question 10

graph movement on the S curve and shift of the S curve

Answer 10

…