LS9 - Supply Flashcards
What is revenue? What is the equation for total revenue?
Revenue is the income that a government or company receives
Total Revenue === Price *** Quantity
What is supply?
Supply is the quantity of a good or service that firms are willing to sell at a given price over a given period of time
What does the law of supply state?
As the price of a good increases, quantity supplied increases; conversely, as the price of a good decreases, quantity supplied decreases
What are contractions and extensions/expansions in supply?
An increase in price results in an extension/expansion in supply
A decrease in price results in a contraction in supply
Both of these can be represented by a movement along the supply curve
What two things does the supply diagram assume?
Firms are motivated to produce by profit
The cost of producing a unit increases as output increases
How does productivity effect supply?
Increased productivity increases supply as more of a good or service can be produced
How does cost of production effect supply?
When cost of production decreases, supply increases as it costs less for producers to output goods or services
How does weather effect supply?
Weather affects the supply in a few markets such as agriculture where poor weather will limit produce whereas good conditions will promote growth and output
How does technology effect supply?
As technology improves, the cost of production decreases and productivity increases which leads to an increase in supply
How does the number of firms effect supply?
If there are more firms in a market, there are more producers producing a good or service increasing supply. Moreover, the increased competitivity created by more firms in a market encourages the improvement of technology increasing supply
How does a subsidy effect supply?
Subsidies are money grants given by the government to producers to lower costs and encourage output. This helps to increase supply
How does indirect tax effect supply?
Indirect tax is a tax on production that firms have to pay. If indirect tax increases, cost of production increases, and supply decreases
How do substitute goods affect each other on the supply curve?
As the price of a substitute good increases there is an expansion along the supply curve. This means more of this substitute good is supplied and as this is a substitute for another good, the supply and demand of that good decreases
