Ch-4: Supply

Question 1

Define:

Supply

Answer 1

Supply is the willingness and ability to sell a product

Question 2

True/False:

Supply is not influenced by amount of production

Answer 2

False, Supply is influenced by amount of production

Question 3

Define:

Law of supply

Answer 3

The relationship between price and supply is positive
meaning: If price is high, supply is high. If price is low, supply is low

Question 4

Define:

Market supply

Answer 4

The total amount of supply at different prices

Question 5

Define:

Unit cost

Answer 5

Unit cost is the average cost of product. It is the unit per production cost

Question 6

What are effects of changes in price on supply

Answer 6

• Extension in supply
• Contraction in supply

Question 7

Define:

Extension in supply

Answer 7

An increase in the quantity supplied of a product due to a rise in the price of product itself

Question 8

Define

Contraction in supply

Answer 8

A decrease in the quantity supplied of a product due to a fall in the price of product itself

Question 9

Define:

Increase in supply

Answer 9

A rise in the quantity supplied at a given price causing the supply curve to shift rightwards

Question 10

Define:

Decrease in supply

Answer 10

A fall in the quantity supplied at a given price causing the supply curve to shift leftwards

Question 11

What are the causes of changes in supply

Answer 11

1. Changes in cost of production
2. Improvements in technology
3. Subsidy
4. Prices of other products
5. Taxes
6. Weather, health of livestock and crops
7. Disaster and war
8. Discoveries and depletions of commodities