4.1.3.3 The determinants of the supply of goods and services Flashcards
Supply
The amount of a good or service that producers are willing and able to produce at any given price
Producers
The individuals or firms that create and supply goods and services to a market
The Law of Supply
As the price of a good or service rises, supply SHOULD rise
What does the Supply Curve show
Shows the relationship between price and quantity supplied
Price falls - quantity decreases
Prices rise - quantity increases
A change in price is ALWAYS shown by a movement along the supply curve
Determinants (influencing factors) of supply
Productivity Indirect tax Number of other firms Technology Subsidies Weather Cost of production
Extension of supply
Movement along the supply curve showing an increase in supply caused by and increase in price (right)
Contraction of supply
Movement along the supply curve showing a decrease in supply caused by a decrease in price (left)
P- Productivity
Higher productivity causes an outward shift in supply, because average costs for the firm fall.
I- Indirect taxes
Inward shift of supply because firms have less retained profit
N- Number of firms.
The more firms there are, the larger the supply
T- Technology.
More advanced the technology causes an outward shift in supply because there is new innovative ways of supplying which lowers cost of production because it could be less time consuming so they have more retained profit and can supply more
S- Subsidies.
Subsidies cause an outward shift in supply because the government are helping them out with costs
W- Weather.
This is particularly for agricultural produce. Favourable conditions will increase supply.
C- Costs of production.
If costs of production fall, the firm can afford to supply more. If costs rise, such as with higher wages, there will be an inward shift in supply
What is the supply curve under perfect condition?
Marginal cost curve
