supply Flashcards
what is supply
supply is the quantity of a good or service that a seller/firm is willing and able to supply at a given price in a period of time
supply curve description
it slopes upwards from left to right indicating a positive relationship between supply and price. as price rises it encourages producers to offer more goods on sale
why does a supply curve slope upwards (3)
- profit motive: if market price rises due to increase in demand it becomes more profitable for business to increase output
- production and costs: when output increases a firm’s production tends to rise so a higher price is needed to cover the extra costs
- new entrants coming into the market: high prices can encourage other business to enter the market leading to increase in total supply
what is the basic law of supply
more will be supplied at a higher price than a lower price
factors causing a shift of the supply curve/determinants of supply (9)
- cost of production: lower costs = business can supply more at each price
- technology improvement: leads to increased supply due to increase efficiency
- government taxes on a business: increased tax = shift to the left
- government subsidies: this helps firms and shifts supply curve to the right
- weather: e.g. agriculture can be affected by weather conditions
- changes in prices of other commodities: changes in the price of other goods may change supply of commodities who’s price has not changed
- change in number of producers: supply increases if more firms enter the market
- unexpected events: natural disasters can reduce supply
- expectations of price changes: suppliers may increase the quantity supplied to the market if they expected a sudden increase in demand
what is joint supply
when an increase or decrease in supply of one good leads to an increase or decrease in supply of another product
what is competitive supply
goods in competitive supply are alternative products a business could make with its factors of production
