Supply

Question 1

What is a general rule of thumb between profitability and supply of a product?

Answer 1

As a general rule, any event that makes production of a specific product more profitable will lead firms to supply more of it.

Question 2

What is Quantity Supplied?

Answer 2

quantity supplied
The amount of a good or service that producers want to sell during some time period.

Quantity supplied is a flow; it is so much per unit of time.

Question 3

What is the difference between Quantity supplied and Quantity sold/exchanged?

Answer 3

Note also that quantity supplied is the amount that producers are willing to offer for sale; it is not necessarily the amount that they succeed in selling, which is expressed by quantity sold or quantity exchanged.

Question 4

The quantity supplied of a product is influenced by the following key variables:

Answer 4

Product’s own price
Prices of inputs
Technology
Government taxes or subsidies
Prices of other products
Significant changes in weather
Number of suppliers

Question 5

How do we expect the total quantity of a product supplied to vary with its own price?

Answer 5

A basic economic hypothesis is that the price of the product and the quantity supplied are related positively, other things being equal. That is, the higher the product’s own price, the more its producers will supply; the lower the price, the less its producers will supply.

Question 6

What is a supply schedule?

Answer 6

supply schedule

A table showing the relationship between quantity supplied and the price of a product, other things being equal.

Question 7

What is a Supply Curve?

Answer 7

supply curve
The graphical representation of the relationship between quantity supplied and the price of a product, other things being equal.

The supply curve represents the relationship between quantity supplied and price, other things being equal; its positive slope indicates that quantity supplied increases when price increases.

Question 8

Definition of Supply

Answer 8

supply
The entire relationship between the quantity of some good or service that producers wish to sell and the price of that product, other things being equal.

Question 9

What is “Quantity supplied”? And what’s the difference between that and Supply

Answer 9

A single point on the supply curve refers to the quantity supplied at that price.

Supply is the whole supply curve. Quantity supplied is a specific point ON the supply curve.

Question 10

What dose a shift int he supply curve mean?

Answer 10

A shift in the supply curve means that at each price there is a change in the quantity supplied.

A change in any of the variables (other than the product’s own price) that affect the quantity supplied will shift the supply curve to a new position.

Question 11

What direction dose a supply curve shift when there is an increase in the quantity supplied?

Answer 11

An increase in the quantity supplied at each price is shown in Figure 3-6. This change appears as a rightward shift in the supply curve.

Question 12

What direction dose the supply curve shift when there is a decrease in the quantity supplied?

Answer 12

a decrease in the quantity supplied at each price would appear as a leftward shift.

Question 13

What are six possible causes of shifts in the supply curve?

Answer 13

Prices of Inputs
Technology
Government taxes or subsidies
Prices of other products
Significant changes in weather
Number of suppliers

Question 14

What are a firms inputs?

Answer 14

All things that a firm uses to make its products, such as materials, labour, and machines, are called the firm’s inputs.

Question 15

How dose prices of inputs affect the amount of a product that is being made?

Answer 15

Other things being equal, the higher the price of any input used to make a product, the less profit there will be from making that product. We expect, therefore, that the higher the price of any input used by a firm, the less the firm will produce and offer for sale at any given price of the product.

Question 16

What directions does a rise and fall in the price of inputs cause the supply curve to shift?

Answer 16

A rise in the price of inputs reduces profitability and therefore shifts the supply curve for the product to the left; a fall in the price of inputs makes production more profitable and therefore shifts the supply curve to the right.

Question 17

How are new technologies changing the way that we are able to produce goods? What are examples of some of these technologies?

Answer 17

Today, advances in technology are causing revolutionary increases in our ability to produce new products and services. Nanotechnology, 3D printing, cloud computing, robotics, and artificial intelligence are all examples of technologies that are both reducing the costs of producing existing goods and also increasing the range of products we are able to produce. These changes in the state of knowledge cause shifts in supply curves.

Question 18

What directions will technological innovations typically shift the supply curve?

Answer 18

Any technological innovation that decreases the amount of inputs needed per unit of output reduces production costs and hence increases the profits that can be earned at any given price of the product. Because increased profitability leads to increased willingness to produce, this technological change shifts the supply curve to the right.

Question 19

Governments often levy special taxes on the production of specific goods, such as gasoline, cigarettes, and alcohol.

How does this affect the production and sale of those goods and in what direction does this shift the supply curve?

Answer 19

These taxes make the production and sale of these goods less profitable. The result is that the supply curve shifts to the left.

Question 20

For other products, governments often subsidize producers—that is, they pay producers a specific amount for each unit of the good produced.

What kind of markets does this typically occur in? In what direction does it shift the supply curve?

Answer 20

This often occurs in agricultural markets, especially in the United States and the European Union. In such situations, the subsidy increases the profitability of production and shifts the supply curve to the right.

Question 21

How can changes in the price of one product lead to changes in the supply of some other product?

Answer 21

Changes in the price of one product may lead to changes in the supply of some other product because the two products are either substitutes or complements in the production process.

Question 22

Example of product substitutes and how the price of one can change the supply of the other. (Oats and wheat)

Answer 22

A prairie farmer, for example, can plant his field in wheat or oats. If the market price of oats falls, thus making oat production less profitable, the farmer will be more inclined to plant wheat. In this case, wheat and oats are said to be substitutes in production—for every extra hectare planted in one crop, one fewer hectare can be planted in the other. In this example, a reduction in the price of oats leads to an increase in the supply of wheat.

Question 23

Example of when two products are complimentary of each other and how the price in once can change the supply of the other. (Oil and Natural gas)

Answer 23

An excellent example in which two products are complements in production is oil and natural gas, which are often found together below Earth’s surface. If the market price of oil rises, producers will do more drilling and increase their production of oil. But as more oil wells are drilled, the usual outcome is that more of both natural gas and oil are discovered and then produced. Thus, the rise in the price of oil leads to an increase in the supply of the complementary product—natural gas.

Question 24

What are some examples of how significant changes in weather can affect the supply of different goods?

Answer 24

Especially in the agricultural sector, significant changes in the weather can lead to changes in supply. Drought, excessive rain, or flooding can all massively reduce the supply of wheat and other crops growing in temperate climates. In tropical locations, hurricanes can wipe out a coffee or banana crop, and a cold snap or frost can decimate the supply of fruit.

Question 25

How can the number of suppliers cause a shift to the right on the supply curve?

Answer 25

For given prices and technology, the total amount of any product supplied depends on the number of firms producing that product and offering it for sale. If profits are being earned by current firms, then more firms will choose to enter this industry and begin producing. The effect of this increase in the number of suppliers is to shift the supply curve to the right.

Question 26

How can a shift the left occur in regards to the number of suppliers?

Answer 26

Similarly, if the existing firms are losing money, they will eventually leave the industry; such a reduction in the number of suppliers shifts the supply curve to the left.

Question 27

What is a “change in supply”?

Answer 27

change in supply
A change in the quantity supplied at each possible price of the product, represented by a shift in the whole supply curve.

that is, a change in the quantity that will be supplied at every price.

Question 28

What is a “change in the quantity supplied?”

Answer 28

change in quantity supplied
A change in the specific quantity supplied, represented by a change from one point on a supply curve to another point, either on the original supply curve or on a new one.

Question 29

what can a change in quantity supplied be a result of?

Answer 29

A change in quantity supplied can result from a change in supply with the price constant, a movement along a given supply curve because of a change in the price, or a combination of the two.