Revision Questions Flashcards
Does a shortage of product cause an inward shift in the supply curve - on the basis that it something that can be mass produced in the supply curve
When there’s a shortage of product it means the quantity demanded exceeds the quantity supplied.
In response to this producers may increase their production to take advantage of higher prices, leading to an increase in the quantity supplied.
This increase is represented by an outward shift on the supply curve, indicating that at any given price, producers are willing to supply more of the product.
Does a shortage of product cause an inward shift in the supply curve- on the basis that the product is scarce or can be limited such as eggs or milk
If chickens are I’ll it reduces egg production, limiting the quantity of eggs available in the market. Producers feel constraint due to the time needed to restock flock which prevents them from quickly increasing production. Despite higher prices producers are unable to significantly increase egg production.
Shortage causes quantity supplied to be relatively fixed due to producers inability to meet increased demand.
Inability to produce results in the inward shift of the supply curve.
At each price level, producers are willing to supply fewer eggs compared to the original situation, leading to higher equilibrium prices and lower equilibrium quantities.
A firm should produce up to the level where marginal revenue (MR) equals marginal cost (MC)
True.
A firm maximises its profit by producing up to the level where marginal revenue (MR) equals to Marginal cost (MC). This is because at this level of output, the additional revenue gained from producing one or more units (MR) is equal to the additional cost incurred to produce that extra unit (MC). Producing beyond this point would lead to a decrease in profit since the additional cost exceeds the additional revenue, while producing below this point would mean missing out on potential profit opportunities.
A limited number of substitutes for a good mean that it’s demand is price in elastic
True. When a limited number of substitutes are available for a good, consumers have fewer alternatives to switch to if the price of that goods changes. As a result, the quantity demanded is less responsive to changes in price, leading to a situation of price inelastic demand. In other words, even if the price of the good changes, consumers may continue to purchase roughly the same quantity of good because they have fewer viable alternatives.
The law of diminishing marginal utility applies to all goods
False as the law of diminishing marginal utility may depend on the type of goods being considered. For instance, while the law usually holds true for most goods and services it may not apply to luxury goods, where consumers may continue to experience increasing marginal utility with increased consumption due to factors such as status or conspicuous consumption.
