chp 8

Question 1

Supply

Answer 1

The willingness and ability to sell a product

Question 2

Supply and price relationship

Answer 2

Positively

Question 3

Individual supply

Answer 3

Supply from one firm

Question 4

Individual supply is

Answer 4

The supply of one firm

Question 5

Market supply

Answer 5

The total supply of a product supplied by all the firms in the industry
Total supply of a product

Question 6

A supply curve can be used to

Answer 6

Demonstrate how a change in the price of a product affects the quantity that is supplied. This is shown by a movement along the supply curve up or down

Question 7

Extension in supply

Answer 7

A rise in the quantity supplied caused by a rise in the price of the product itself

Question 8

Contraction in supply

Answer 8

A fall in the quantity supplied caused by a fall in the price and f the product itself

Question 9

Quantity supply refers

Answer 9

Extension in supply and contraction on supply

Question 10

Changes in supply

Answer 10

Changes in supply conditions causing shifts in the supply curve

Question 11

Any change in supply will cause a shift

Answer 11

In the entire supply curve as there is no change in the price of the product supplied

Question 12

What causes changes in supply

Answer 12

Improvements in technology
Cost of production
Taxes
Subsidies
Prices of other products
Weather conditions

Question 13

How factors affecting supply differ in agriculture

Answer 13

The supply of crops, vegetables
Industry
Service sector
and fruit, and the health of livestock, may be affected by poor weather conditions. Excessive rainfall or lengthy drought can lower yields and hence supply.
These problems are becoming more serious due to the effects of climate change in many parts of the world.

Question 14

How factors affecting supply differ industry

Answer 14

Changing costs of production and advances in technology affect the supply of almost everything that is produced For example, an increase in wages will increase the costs of production, which in turn may be offset by technological improvements that lead to a rise in productivity

Question 15

Service sector

Answer 15

Banks and large retailers have extended the use of
IT in their businesses in order to cut costs and remain competitive.

Question 16

Increase in supply

Answer 16

A rise in supply at any given price causing the supply curve to shift to the right

Question 17

Decrease in supply

Answer 17

A fall in supply at any given price causing the supply curve to shift to the left

Question 18

State whether the following would cause a decrease in supply or an increase in supply of tuna caught by fishing vessels from Mauritius:
an extended period of heavy rainfall and strong winds
ii a new infra-red camera that makes it easier to
detect tuna
i a rise in the price of other fish
v new concerns over ethical fishing practices

v research that shows the health benefits of
eating tuna.

Answer 18

i a decrease in supply
ii an increase in supply
ili an increase
in supply
iv a decrease in supply
v an increase in supply

Question 19

Any change in the condition of supply leads to a shift

Answer 19

Outwards or inwards of the supply curve.

Question 20

Describe how subsidies and taxes might affect the ability of a small vegetable farmer in Pakistan and a small light-bulb manufacturer in China to supply.

Answer 20

For the vegetable farmer, subsidies will reduce the price paid by consumers in local markets. The farmer’s income will be likely to increase as she sells all that she is able to produce. Subsidies may prompt
SKILLS FOCUS
her to switch production to crops where subsidy is greatest. A change in taxation may have little or no effect because fresh food is not usually taxed.
For the light-bulb manufacturer, a new sales tax could lead to less supply in the domestic market. A tax on its profits could mean there are fewer funds available to invest in new equipment in the factory.
Subsidies are unlikely to have any effect on supply, other than if export subsidies are given by the government.

Question 21

What is the usual relationship between supply and price?

Answer 21

A positive one whereby an increase in price leads to an increase in the quantity supplied and a decrease in price leads to a decrease in the quantity supplied

Question 22

Draw a typical supply curve. On it, show:
an extension in supply ii an increase in supply.
Explain what each means.

Answer 22

An extension in supply is shown by a movement up the supply curve. This is a consequence of a rise in the price of the product

An increase in supply is shown by a shift to the right of the supply curve. This means that there is an increase in supply at any given price

Question 23

Give four reasons why the global supply of coffee is increasing.

Answer 23

Less disruption of supplies due to adverse weather conditions

An increase in subsidies from governments to coffee farmers

A large increase in the price of tea

A fall in the cost of cultivating coffee beans

Question 24

A garment manufacturer in Bangladesh supplies a number of wholesale customers in the US. It faces competition from garment manufacturers in China. Explain the likely effects on the supply of garments when: i its wholesale customers force down the prices they are willing to pay
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the Chinese government provides a new export subsidy for its garment manufacturers.

Answer 24

This is represented by a movement down the supply curve SS from A to B. If US wholesalers reduce the price they are willing to pay from P to P, the Bangladeshi garment manufacturer will only be willing to supply a, and not Q The effect of a subsidy by the Chinese government for its manufacturers leads to a shift to the left of the supply curve since Bangladeshi garments are relatively more expensive. So, at any one price, fewer garments Will be supplied.

Question 25

2
TIP
Global oil prices in 2017 stabilised at around $50 per barrel after reaching $150 per barrel in 2014. Discuss whether or not changes in supply or changes in demand have had a greater influence on price.

Answer 25

Changes in supply come about through the actions of suppliers (such as OPEC and US shale oil producers). An increase in supply can be shown by a shift to the right of the supply curve for oil. This would cause the price of oil to fall.
• A change in demand could also have occurred.
The reduction in the price of oil by 2017 could indicate a decrease in demand from 2014. This is less likely to have occurred.

It is not easy to say which has had the most influence on price - more than likely, it is due to supply factors. Additional data is required to be more certain.
• The diagram below could be used to explain the change in price.

Question 26

Why is supply not the same as production?
A production has to take place before supply some goods produced may end up as warehouse stock
C some products supplied may not be sold D when making products, suppliers do not
know the market prices

Answer 26

B

Question 27

What does a market supply curve show?

Answer 27

How much firms will sell at various prices

Question 28

In 2017, drought conditions in France and Italy resulted in a reduction in olives harvested. Which shows the effect on the supply curve for olives?

Answer 28

A shift to the left