Micro 8 - Supply

Question 1

Firm / Suppliers main incentive?

Answer 1

Profit

Question 2

What does the supply curve look like?

Answer 2

Question 3

For which 2 reasons is the demand curve upwards sloping?

Answer 3

1. Suppliers supply more high value products to get more profit
2. New businesses join the market

Question 4

Define indirect taxes

Answer 4

Tax which is levied on goods and services

(levied: charged)

Question 5

Subsidies definition

Answer 5

A grant paid by the government to producers in the aim to create jobs

Question 6

What 5 factors cause a shift in the supply curve?

Answer 6

• Costs of production
• Indirect taxes
• Subsidies
• Price of related goods
• Expectations about future prices

Question 7

How does costs of production cause a shift in the supply curve?

Answer 7

Costs of production increase,
Profitability decreases,
Firms supply less,
Supply curve shifts left.

Question 8

How does indirect taxes cause a shift in the supply curve?

Answer 8

Indirect taxes increase,
Cost of production increase,
Profitability decreases,
Firms supply less,
Supply curve shifts to the left

Question 9

How does Subsidies cause a shift in the supply curve?

Answer 9

Subsidies reduce Cost of production,
Profitability increases,
Firms supply more,
Supply curve shifts right

Question 10

How does Price of related goods cause a shift in the supply curve?

Answer 10

As Good A’s market price increases, QTY supplied will also increase

A related good may be produced using the same factors of production and it’s supply curve will shift left.

Question 11

How does expectations about future prices cause a shift in the supply curve?

Answer 11

If producers expect the price of a good to increase, then they will supply more.