Supply Flashcards
what is supply
it is the quantity of a good or service that a producer is willing and able to supply at a given price in a given period of time
what is the basic law of supply
as price of a product increases, businesses expand supply to the market
what does a supply curve show
it shows the relationship between market prices and how much a firm is willing and able to sell
how are supply curves drawn
sloping upwards from left to right
what are the 3 reasons for the supply curve to be drawn upwards
the profit motive, production and costs, and new entrants coming into the market
what is the profit motive
when if the market prices rise following an increase in demand, it becomes more profitable for businesses to increase their output
what is production and costs
when output expands, a firms production cost tends to rise, therefore a higher price is needed to cover these extra costs of production.
what are new entrants coming into the market
higher prices may create an incentive for other businesses to enter the market leading to an increase in total supply
What are the causes of shifts in the supply curve
.changes in unit costs
.change in exchange rates
.entry of new procedures
.favourable weather conditions
.increase in tax and gov regulations
What causes supply to shift to the right
