Econ Chapter 5 Review Flashcards
What is Supply?
Amount of a product offered for sale at all possible prices
What is the Law of Supply?
As the price rises for a good, the quantity supplied rises (Qs); as the price falls the Qs also falls
What type of relationship exists between price and quantity supplied (QS)?
A direct relationship exists between price and Qs
What are the factors Affecting Quantity Supplied
*There’s two
(list them)
Price & Law of Diminishing Returns
What is the factor of Price?
The higher the price of the good, the greater the motivation for a producer to make more of the good (more profit)
What is the Factor of Law of Diminishing Returns?
For a producer, at some point, adding more factors of production lead output to increase at a decreasing rate
What do the Determinants of Supply do to the Supply Curve?
They cause shifts on the supply curve
What does a shift to the right on the supply curve present?
A shift to the right represents an increase in supply
What does a shift to the left on the supply curve present?
A shift to the left represents a decrease in supply
What are the Determinants of Supply?
(List Them)
- Cost of Inputs
- Technology
- Competition
- Taxes
- Subsidies
- Government Regulations
What is:
1. Cost of Inputs (factors of production)?
When cost of input goes down, supply increases
When cost of input goes up, supply decreases
What is:
2. Technology?
New tools create more efficiency, also causes supply to increase
What is:
3. Competition (number of firms)?
More businesses in an industry create more supply
What is:
4. Taxes?
More taxes puts burdens on companies causing supply to decrease:
Less taxes causes supply to increase
What is:
5. Subsidies?
Government payments to businesses & farmers; always increases supply
