Supply 1.2.2 Flashcards
Define supply.
The amount of a good or service that producers are willing and able to provide at a range of different price levels.
Define market supply.
Total output of all individual suppliers of a particular good or service. Producers decide how much they are willing and able to supply at a given price. Based on the cost of inputs and amount of profit they are likely to make, together with any objectives they have.
As price rises…
Quantity supplied rises
As price lowers…
Quantity supplied lowers
What is the supply curve?
Shows the relationship between the price and the quantity of the product that producers want to create and sell.
What does a Supply Curve show?
Total amount of a product supplied to the market by all producers at a range of different prices. Despite the name, it is usually represented as a straight line.
What causes a change in supply?
- A cost in production
- External shocks
- New technology
- Taxation and subsidies
The Supply Curve shifts right, what has happened?
Quantity Demanded has increased
The Supply Curve shifts left, what has happened?
Quantity Demanded has decreased
How does a change in the cost of production effect supply?
If costs increase, it is less profitable to produce the product thus less is supplied so Supply Curve shifts left. If costs decrease, it is more profitable so producers respond by increasing output thus Supply Curve shifts right.
How does the introduction of new technology effect supply?
Technological progress allows business to produce a product at a lower cost. This increases amount supplied at that price thus, Supply Curve shifts to the right.
How does Indirect Tax effect supply?
An increase in tax on a product means price for the consumer rises. At any level of output the price is higher thus the demand curve shifts to the left.
How does a Government Subsidy effect supply?
Subsidies are payments that encourage producers to make more, this product can then be sold at a lower price so shifts right.
