Micro - Supply ✔️

Question 1

Movement along a supply curve.

Answer 1

showing that there is a rise in price which means that the market wants to supply more and visa versa

Question 2

Shift in the supply curve

Answer 2

If it moves to the right then there is an increase in the amount supplied and if it shift to the left then there is a fall in the amount supplied.

Question 3

Factors that may cause a right shift in the supply curve

Answer 3

Technology - Advancements in technology allow firms to produce goods more efficiently thus reducing firms costs of production leading to an increase in output.

Indirect taxes (specific and ad valorem) - A reduction in tax will reduce the firms overall costs and therefore allow firms to increase the quantity of good/services they provide.

Subsidies - By providing subsides it reduces the firms costs and therefore encourages them to increase the quantity of goods/services that they provide.

Productivity - An increase in productivity will allow firms to increase the quantity of goods/services that they provide.

Number of firms - An increase in the number of firms in a market will lead to an overall increase in the supply of goods/services to the market.

Weather - Changes in the weather can affect the supply of certain goods/services to a market. E.g. decrease in supply of crops if there is a drought

Exchange rates - An appreciation in the value of currency will reduce the price of imports and therefore will lead to an increase in the supply of goods/services in given markets because that firm’s costs of production will decrease

Question 4

Factors that may cause a right shift in the supply curve

Answer 4

An increase in production costs: If the costs of producing a good or service increase, suppliers may be less willing to produce and sell that good or service, leading to a decrease in the quantity supplied and a shift of the supply curve to the left.

A decrease in the number of suppliers: If the number of firms producing a good or service decreases, the quantity supplied will decrease and the supply curve will shift to the left.

A decrease in technology: If a decrease in technology makes production less efficient, this will increase the production cost and will lead to a decrease in the quantity supplied and a leftward shift of the supply curve.

A change in government regulations: Government regulations, such as taxes, tariffs, or quotas, can increase the cost of production and decrease the quantity supplied, leading to a leftward shift of the supply curve.

A change in weather conditions: Some good like agricultural product, weather can have significant impact on production and can decrease the quantity supplied and cause a leftward shift of the supply curve.