Supply

Question 1

Explain, with a diagram, the impact of changes in price and changes in the determinants of supply, using movements and shifts

Answer 1

Supply is upward sloping as it has a direct relationship with price, the higher the price, the more is supplied, as producers will make more to keep with the growing demand and therefore maximise profits.

Question 2

Shifters of the Supply Curve:

Answer 2

Productivity - Higher productivity can lead to lower average costs, and therefore the company will increase supply, as they can produce more at a lower cost, shifting S curve right.

Indirect Taxes - These cause lower supply as it causes higher average costs and therefore companies need to lower supply to keep normal profit therefore shifiting supply curve left.

Number of firms - If the number of firms increase, then there will be more people supplying and therefore oviously an increase in the Supply, leading to shift right in supply curve.

Technology - improvements in tech lead to lower average costs, which lead to a firm producing more at a lower cost and therefore increase in supply, shifiting supply curve right.

Subsidies - These increase the capital of a firm and therefore can produce more with the more money, leading to increase in supply and therefore a shift right in supply curve

Weather - Favourable conditions will lead to an increase in the supply (Especially in agriculture) therefore shifiting supply curve right

Costs of Production - if costs of production lower then firm can produce more at a lower cost, increasing supply and therefore shifitng supply curve right.

Question 3

Explain joint and competitive supply with the aid of a diagram

Answer 3

Joint Supply - Increasing the supply of one good, causes an increase/decrease in the supply of another good E.G. Increase in supply of lamb leads to an increase in the supply of wool.

Competitive Supply - When goods are perfect substitutes and therefore compete against each other for larger market control.

Question 4

Define Supply

Answer 4

The total amount of goods and services that a producer will provide/make at a given time and price.