supply

Question 1

increase in price?

Answer 1

extension in supply so quantity supplied increases, moving up supply curve

Question 2

decrease in price

Answer 2

contraction in supply so quantity supplied decreases

Question 3

price elasticity of supply

Answer 3

responsiveness of quantity supplied to a change in price

Question 4

formula for pes

Answer 4

percentage change in quantity supplied/ percentage change in price

Question 5

values of pes negative or positive

Answer 5

always positive

qs increases with increase in price, +/+ is positive

qs decreases with decrease in price, -/- is positive

Question 6

values of pes- elasticity

Answer 6

bigger than 1 is elastic, quantity supplied is bigger than % change in price, more responsive to change in price

less than 1, inelastic, quantity supplied less than change in price, e.g. production costs high so less supplied, qs lower & price higher, less responsive to changes in price
closer to 0- more inelastic

pes of 1 is unitary elastic, % change in price leads to % change in quantity supplied of same size

Question 7

elastic supply curve

Answer 7

When PES is between 1 and ∞. Elastic supply is very responsive to changes in price.

An elastic supply curve has a flatter, more gentle slope because a change along the price axis will lead to a larger % change along the quantity axis.

Question 8

inelastic supply curve

Answer 8

When PES is between 0 and 1. Inelastic supply is unresponsive to changes in price.

An inelastic supply curve has a steep slope because a change along the price axis will lead to a smaller % change along the quantity axis.

Question 9

unitary elastic supply cruve

Answer 9

pes 1
#A unitary elastic supply curve must start from the origin.

Question 10

factors influencing pes

Answer 10

spare capacity
availability of production
state of economy
stock and perishability
time period

TEASS

Question 11

spare capacity influencing pes

Answer 11

spare capacity is what is not being used
if more spare capacity, is prices rise, firms can use up spare capacity and increase output to take advantage of higher price, thus companies are more responsive to changes in price= supply more elastic, can increase quantity supplied by larger percentage as there is still more to use up

if little spare capacity, harder to increase output by much, cannot respond much to changes in price thus inelastic- they cannot increase their supply

Question 12

availability of factors of production influencing pes

Answer 12

how easy it is to find land labour capital and enterprise.

• availability of resources
• when it is difficult to get factors of production, difficult to find resources for it so supply cannot be increased, supply unresponsive to price thus inelastic supply

-if easy to find resources, if prices rise, supply can be increased easily

very available is elastic
less availability is inelastic

Question 13

state of economy influencing pes

Answer 13

price of goods increasing, producers looking to maximise profit so higher price gives more incentive to sell, expand size of business, higher more workers

bad state of economy, if workers are unemployed it is easy to find workers looking for vacancies,
if areas are vacant, easier to find land to build on= suggesting elastic supply

good state of economy- harder to increase quantity supplied, employees etc less available as already occuipied, struggling to increase production therefore inelastic supply

Question 14

stock piles and perishability influencing pes

Answer 14

stock pile- stock of goods held in reserves
(out of date quickly= perishable)

more easier to stockpile= more elastic, easily stockpiled so if prices rise, producers can react quickly, selling the goods they have in storage , can increase quantity supplied by larger percentage so elastic supply

harder to stockpile if more perishable so if prices rise, larger quantities cannot be stockpiled for longer periods, producers cannot respond as quickly- they have to produce more from scratch taking a longer time. producers unable to respond much thus inelastic supply

Question 15

time influencing pes

Answer 15

short run is when at least one factor of production is fixed, cannot increase them in short run- not enough time - quantity supplied can only be increased by small % as theyre limited by fixed FOPs e.g. not enough space or machinery- factory and machines are fixed, hard to change quantity supplied thus inelastic supply

long run is when all factors of production can be changed , allows time for it to be changed - so low elasticity of supply
- time to build more factory space and more time to build more- in long run supply more elastic, more time to increase FOPs so they can respond more, supply is more elastic

(e.g evident when looking at agricultural producers. growing crops is harder to do in short run despite increase in price- inelastic but in long run: enough time to grow thus they can respond to changes in price )

Question 16

perfectly inelastic supply

Answer 16

changes in price but quantity supplied stays exactly the same thus pes of 0

examples- short run. even if price of agricultural goods increase, farmers cannot grow crops immediately as it takes long to grow
or tickets in a stadiium, cannot supply anymore tickets even if increase in price

Question 17

perfeclty elastic supply

Answer 17

small change in price, massive change in quantity supplied
more elastic, more response to changes in price
supply curve becomes flatter

so pes is then equal to infinity

Question 18

Perfectly inelastic supply

Answer 18

When PES = 0. Supply will not respond at all to a change in price.

E.g. in the short run, even if the price increases by a huge %, the supply of coconuts will not change because the number of coconut trees is fixed

Question 19

perfectly elastic supply

Answer 19

When PES = ∞. Supply will be infinitely responsive to a change in price.

Question 20

conditions of supply - technology and weather

Answer 20

technology advancements help to supply more, the supply curve will shift outwards

bad weather will cause the supply curve to shift inwards.

Question 21

when price increases

Answer 21

there is an extension in supply, moving up along supply curve

Question 22

conditions of supply - costs

Answer 22

e.g. costs of ingredients for something, e.g. pizza dough prices go up then producing a pizza is more costly, so firms make less profit, each product more expensive to produce- supply of the good decreases
- cannot afford much pizza dough, supply decreases

when cost of producing a good deacreases. curve shifts out to the right

Question 23

conditions of supply- number of suppliers and productivity

Answer 23

more workers and labour= more productivity - more people who will sell and supply
more suppliers increases supply shifting the curve outwards
fewer suppliers will decrease supply shifting curve inwards

if workers are specialised using division of labour, it increases productivity of workers as workers become more efficient
- the curve shifts out to the right

it demotivated and disinterested, productivity falls and curve shifts inwards

Question 24

supply

Answer 24

willing and able to sell it

Question 25

if price of a good rises, what happens

Answer 25

quantity supplied increases, as producers make more profit by selling it at higher prices

Question 26

if a price of a good decreases?

Answer 26

quantity supplied decreases, producers will make less profit selling their products and lower prices

Question 27

supply curves slope upwards because

Answer 27

when price goes up the quantity supplied increases

Question 28

as prices increase firms and suppliers will be incentivised to sell more quantity if we assume

Answer 28

asume that firms want to maximise profit

Question 29

supply curve considers

Answer 29

price of a good and the quantity supplied of it

Question 30

contractions and extensions in supply

Answer 30

contraction in supply,
if prices go down it causes a contraction in supply

when price goes up there is an extension in supply