supply Flashcards
Define supply in micro terms
Supply can be defined as the amount of a good or service that producers are willing and able to sell at any given price
What are the 6 determinants of supply
The price of the good
The impact of changing costs of production
Technological progress
Prices of other goods and services
Government policy e.g. taxes and subsidies
Other factors e.g. expectations
How does technologies determine supply for firms
firms can produce in a more efficient and cost effective manner
Improved large scale machinery allows them to spread fixed costs over greater output making the cost per unit produced cheaper
more profitable
How does price of other goods or services determine supply for firms
- Firm can make many products using factors of production
- If the price of good A increases this might make it more profitable to switch from supplying good B in order to supply good A
- New firms will enter markets when prices of goods rise as there is a greater incentive to make profits
Define taxation
is a charge placed on individuals or firms. Governments use taxation to finance their spending.
4 Factors that cause supply curve to shift
Factors causing a shift in the supply curve include:
Changes to the cost of production
Introduction of new technology
Indirect taxes
Government subsidies
What is ad valorem tax
percentage of the price of the good or service
Give 3 reasons why the supply curve is sloping upwards
- price up = more profit to increase output
- Production costs increase when output increase so higher prices needed to cover extra costs
- new entrants to market = more supply
define market supply
total supply brought to the market by producers at each price
example of indirect tax
vat passed onto consumers
example of joint supply
wheat + straws
