Supply

Question 1

Define supply

Answer 1

The relationship between possible prices and the corresponding quantities that firms are willing to offer per period of time

Question 2

What does the law of supply state?

Answer 2

As the price of a product rises the quantity supplies of the product will rise, ceteris paribus.

Question 3

What are factors that determine the level of supply?

Answer 3

ROTTEN 
Resource cost
Other goods
Tariffs and Taxes
Technological Change
Expectations of future prices
Natural conditions

Question 4

How does resource cost affect supply?

Answer 4

If there is an increase in the cost of a factor of production this will increase a firm’s cost

Question 5

What are other goods?

Answer 5

Competitive supply

Joint supply

Question 6

What is joint supply?

Answer 6

Joint supply- sometimes when one good is produced, another is produced at teh same time eg, beef/leather milk

Question 7

What are expectations of future prices?

Answer 7

Producers who expect that demand will increase in the future may start to supply more assuming that higher demand will lead to higher prices

Question 8

How can natural conditions affect supply?

Answer 8

Hurricanes, floods and droughts will reduce supply of most goods

Question 9

What is the distinction between movement along a supply curve and a shift of the supply curve?

Answer 9

A change in the price of the good itself leads to a movement along the existing supply curve. A change in any of the other determinants will cause the shift of the supply curve.

Question 10

What does the vertical supply curve mean?

Answer 10

There is a fixed quantity of the good supplied because there is no time to produce it or there is a fixed quantity of the good because there is no possibility of ever producing more of it.