Supply Flashcards
What is Supply?
Supply is the willingness and ability of firms to produce goods and services at different prices.
As prices increase firms will be more willing and able to supply. This is an extension in supply.
As prices decreases firms will be less willing and able to supply. This is an contraction in supply.
What is the Supply Curve?
The Supply curve shows the relationship between price and quantity supplied as positive
As price is changed there is a change in supply.
What is a Movement in Supply?
Changes in price lead to movements along the supply curve
.
An increase in price will cause a movement up the supply curve (extension).
A decrease in price will cause a movement down the supply curve (contraction).
What are the other Factors of Supply?
We broadly group the factors that determine supply, other than price, as the quantity, quality and the costs of the factors of production.
How do the Factors other than Price affect Supply?
Changes in these factors cause a shift.
This is because the amount of what firms are willing and able to produce at a given price will change if one of these factors change.
For example, If there is an increase in the quality of the factors of production, then firms would be able to produce more.
What are Shifts in Supply?
A shift is when a factor other than price changes supply.
What causes an inwards shift in supply?
A shift inwards in the supply curve will be caused by:
A decrease in the quantity of the factors of production (e.g. less workers).
A decrease in the quality of the factors of production (e.g. old and unreliable machinery).
An increase in the costs of production (e.g. if the cost of land increased then firms will buy less land and therefore make less products).
What causes an outwards shift in supply?
