Factors affecting supply Flashcards
What factors affect the supply?
A decrease in costs of production. More firms. Investment in capacity Related supply Weather Technological improvements Lower taxes Government subsidies
How does a decrease in costs of production affect supply?
This means business can supply more at each price. Lower costs could be due to lower wages, lower raw material costs
How does more firms affect supply?
An increase in the number of producers will cause an increase in supply
How does investment in capacity affect supply?
Expansion in capacity of existing firms, e.g. building a new factory
How does related supply affect supply?
An increase in supply of a related good e.g. beef and leather, as there is an increase in the availability of beef it also increases the supply of leather.
How does weather affect supply?
Climatic conditions are very important for agricultural products, if there is a draught and it destroys all of a large suppliers crops then supply in the economy will be lower.
How does technological improvements affect supply?
Improvements in technology, e.g. computers, reducing firms costs, or increasing the productivity at the world place meaning more goods can be produced quicker resulting in a higher supply on the market.
How does lower taxes affect supply?
Lower direct taxes (e.g. tobacco tax, VAT) reduce the cost of goods, meaning that a firm can supply more as it costs less to supply the good.
How does government subsidies affect supply?
An increase in government will mean that producers will be encouraged to produce more as they now get a bonus for producing that good this encourages increased production as it will now be more profitable.
What is joint supply?
Joint supply occurs when two goods are supplied together. E.g. If you produce beef you will get leather as a side effect.
