Supply Flashcards
What is supply?
This is the quantity of a commodity suppliers are willing and able to produce and make available for sale at a particular price, over a particular period of time.
What is the theory of supply?
Everything being equal the higher the price the higher the quantity supplied and the lower the price the lower the quantity supplied.
what is the generic supply function?
Qs = a + bp
where a and b are constants
and p is the price
What is a supply schedule?
It is a table that shows the different quantities of a commodity suppliers are willing and able to supply at different prices.
What is market supply?
It is the horizontal summation of the individual supply curves.
What are the factors that affect supply?
Acronym: TTTEN
Technology: If an improvement in technology leads to a decrease in the cost of production, more units can be produced at lower prices, leading to an increase in supply
Taxes and Subsidies: In production, tax is seen as cost so if taxes for the production of a product increase then, the cost of production increases leading to a decrease in supply and vice-versa. While subsidies are seen as income, if a subsidy is placed on the production of a good, it lowers the cost its cost of production, leading to an increase in supply.
The number of suppliers: As the number of suppliers for a product increases the supply for that product also increases.
Expectation: If suppliers expect the price of a product to increase in the future they shall hold supply now, to supply and sell at a higher price in the future, reducing supply for now, and vice-versa.
Natural conditions: Some products like agricultural products require certain natural conditions to perform well, e.g. good weather. In this case the better the conditions, the better the performance of the product, which will lead to an increase in supply and vice-versa
Differentiate between changes in quantity supplied and changes in supply.
Change in quantity supply is a movement along the same supply curve, caused by a change in price. If this movement is towards the right it is an extension and if it is towards the left, it is a contraction.
On the hand a change in supply is a shift of a supply curve from its original position to a new one, this is caused by other than price.
What are the exceptional supply curves that exist?
-> Supply curves regressive at the bottom
-> Fixed supply curves
