Supply Flashcards
What is supply?
The quantity of goods that sellers are prepared to sell to buyers at any given price over a period of time.
What does the supply curve show?
The quantity supplied in an economy at any given price.
What causes an extension of supply and why?
A rise in prices, as suppliers will sell more of the good due to the incentive to maximise profits at the higher price.
What causes a contraction of supply and why?
A fall in prices, as suppliers will cut back on potentially unprofitable production.
What are the conditions of supply, that can cause shifts in the supply curve (6)?
1) Taxes or subsidies.
2) Costs of production.
3) Legislation.
4) Anticipation of future events.
5) Technology.
6) The price of other goods.
How can taxes or subsidies cause a shift in the supply curve (2)?
1) If indirect taxes rise, so do costs of production, causing a reduction is supply and the supply curve shifting to the left. Vice versa.
2) The introduction of a subsidy can lower costs of production, increasing supply and shifting the supply curve to the right.
How can costs of production cause a shift in the supply curve?
If production costs rise, and firms cannot pass these costs on to consumers through higher prices, they will make less profit and therefore supply less of the good, shifting the supply curve to the left. Vice versa.
How can legislation cause a shift in the supply curve?
New legislation is likely to incur costs upon firms increasing costs of production and shifting the supply curve to the left. Legislation, such as tariffs, can make it harder to supply a good.
How can the anticipation of future events cause a shift in the supply curve?
If firms anticipate a rise in demand in the future, they may stockpile their goods, reducing supply in the short run, in order to profit in the long term. This will shift the supply curve to the left. Vice versa.
How can technology cause a shift in the supply curve?
New technology can make production more efficient, reducing costs and increasing supply. This will cause supply to shift to the right.
How can the price of goods cause a shift in the supply curve?
If the price of a given product rises, firms may switch production to such product due to the profit incentive. This will cause an increase in supply for given product, shifting the supply curve to the right.
