Supply

Question 1

What is supply?

(Whole line)

Answer 1

Quantity of a good/service/resource that sellers are willing and able to supply to the market at various prices over a fixed time period (all else held constant)

Question 2

Why is supply important?

Answer 2

Determines number of goods/services that are available to consumers in the market as well as the prices that consumers will have to pay to purchase them

Question 3

What is the law of supply? (Direct relationship)

Answer 3

As the price of a good rises, the quantity supplied will increase and vice versa, all else held constant

Increased opportunity costs, increased supply

Question 4

Supply Schedule

Answer 4

Table representation of the relationship between the price of a good and the quanitties producers are willling and able to supply over fixed time period (all else held constant)

Question 5

Supply Curve

Answer 5

Graphical representation of the supply schedule

Question 6

Quantity Supplied

(Specifc Place/Position on the Line)

Answer 6

Quantity of a good that producers are willing and able to supply at a given price

Question 7

Diminishing Marginal Productivity

(MB & MC)

Answer 7

At least one input of prodution is fixed, the marginal productivity of additonal variable resources will eventually fall, all else held constant

Question 8

How does labor affect productivity?

Producers choices:

1. Purchases additional resources
2. Use existing resources more intensively
3. Shift resources from one good to another

Answer 8

As more labor increases, each additional unit of productivity falls

Question 9

What is market supply?

Answer 9

Overall total for a good - horizontal summation of the quantities suppplied by firms, states, nations at each price over a fixed time period, all else held constant

Question 10

What is shift in supply?

(nonprice determinant)

Answer 10

Change in the quanity of a good supplied at every price

Increase supply = righward shift of the curve (increase quantity supplied)

Decrease supply = leftward shift of the curve (decrease quantity supplied)

Question 11

What is movement along the supply curve?

Answer 11

Change in the quantity of a good supplied due to a change in its price

Question 12

Why does supply matter to consumers?

Answer 12

Low supply = less output in market (try the good while you still can)

High supply = hold off on your purchase until the good is more widely available

Question 13

What are the 5 nonprice determinants of supply?

Answer 13

1. Subsidy
2. Taxes
3. Resource Costs
4. Technology
5. # of Sellers and their expectations

Question 14

What is subsidy?

How does it affect the supply curve?

(Direct relationship)

Answer 14

Payment made by the government that does not necessarily require an exchange of economic activity in return

High subsidies + High supply = rightward shift of curve (increase)

Low subsidies + Low supply = leftward shift of curve (decrease)

Question 15

What are taxes?

How does it affect the supply curve?

(Inverse Relationship)

Answer 15

Payment made by the government that is the result of economic activity (collected from individuals and firms)

High taxes + Low supply = leftward shift of curve (decrease)

Low taxes + High supply = rightward shift of curve (increase)

Question 16

How do resource costs and technology relate to the supply curve?

Answer 16

Affects a firms willingness and ability to produce outputs

Question 17

Pattern of resources costs with supply curve

(Inverse Relationship)

Answer 17

Low resources costs + High supply = (right curve - increase)

High resource costs + Low supply = (left curve - decrease)

Question 18

Patterns of technology with supply curve

(Direct relationship)

Answer 18

Positive tech (better technology) leads to decrease the cost of producing a good –> high productivity + high supply (right curve increase)

Negative tech (old) leads to increase the cost of producing a good –> low productivity + low supply (left curve decrease)

Question 19

Sellers

Sellers Expectations

(Direct relationship - both)

Answer 19

Market participants who are willing and able to sell goods

Anticipated future outcomes, including prices that sellers associate with the production of a good