Supply Flashcards

Term 2, Year 10

1
Q

What is the law of supply?

A

As price increases, quantity supplied also increases. As price falls, quantity supplied also falls.

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2
Q

What is market supply?

A

The sum of all individual firms’ supplies for a good.

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3
Q

What are the non-price determinants of supply?

A
  • Cost of factors of production
  • Changes in production technology
  • Price of related goods
  • Producer expectations
  • Indirect taxes and subsidies
  • Number of firms in the market
  • Unpredictable events
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4
Q

Rightward and leftward shifts of the supply curve.

A

Rightward- increase in supply

Leftward- decrease in supply

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5
Q

Cost of factors of production

A

The firm buys various factors of production that it uses to produce its products.

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6
Q

Changes in production technology

A

New, improved technology lowers the costs of production , making production more profitable.

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7
Q

Price of related goods

A

Competitive supply- production of one of two or more products by a firm; goods compete for use of same resources.
Joint supply- production of goods that are derived from a single product; not possible to produce one without the other.

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8
Q

Producer expectations

A

Expects price to rise- firms withhold some current supply, to sell it at a higher price in future.
Expects price to fall- increase supply to take advantage of the current higher price.

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9
Q

Taxes

A

Firms treat taxes as a cost of production.

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10
Q

Subsidies

A

Payment made to a firm by the government. Opposite effect of tax.

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11
Q

Shocks

A

Sudden unpredictable events affecting supply, such as weather conditions.

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