Supply 1.2.2

Question 1

What is supply?

Answer 1

The number of goods/services businesses are willing to sell at a given price in a specific time period.

Question 2

Relationship between supply and price

Answer 2

Direct relationship
As price increase, quantity supplied increase as businesses are incentivised to supply more. Supply curve slopes upwards.

Question 3

Change in production costs

Answer 3

An increase in costs of production makes it more expensive to produce each unit and a business will be able to produce less at a given price.

Question 4

New technology

Answer 4

Advances in technology will lead to lower costs of production and businesses will be able to produce more at a given price.

Question 5

Indirect taxes

Answer 5

The government increases indirect taxes on businesses which causes an increase in the costs of production as firms have to pay extra costs.

Question 6

Government subsidies

Answer 6

A subsidy given by the government to businesses will reduce the costs of production.

Question 7

External shocks

Answer 7

An unexpected event can change the supply.