Determinants of Supply Flashcards
What is the law of supply?
The basic law of supply is that as the market price of a commodity rises, so producers expand their supply onto the market
What is quantity supplied?
Is the amount sellers are willing and able to offer for sale at a single price
What does a change in price do to the supply curve?
Causes a movement ALONG the supply curve
Why does the supply curve normally slope upwards?
Rising prices acts as an incentive for producers expand output - the potential for higher profits is the incentive
Increased output may lead to higher costs of production - but not all economists accept this convention - increased output might lead to lower costs per unit (economies of scale)
What causes shifts in the market supply?
Changes in production costs - wage costs, raw materials and components and energy costs
Government taxes and subsidies
Climatic conditions (important for agricultural supply)
Changes in production technologies
Changes in the number of producers in the market
Changes in the objectives of suppliers in the market
Changes in the prices of substitutes in production
When are two products in joint supply?
Two products are in joint supply when a rise in the output of one product leads to a rise in the supply of the other product
What is supply?
Supply is the quantity of a good or service that a producer is willing and able to supply onto the market at a given price in a given time period
