Supply Flashcards

1
Q

What is supply?

A

Refers to how much is supplied at each price over a certain period of time

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2
Q

What is the shape of the supply curve?

A

Upwards sloping from left to right, indicating that more will be supplied as price increases.

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3
Q

What causes movement along the supply curve?

A

Price changes. Because the curve has a positive slope, a rise in price will cause a rise in QS and a fall in price will cause a fall in QS

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4
Q

What causes shifts in the supply curve?

A

Cost of production
Productivity of workforce
Indirect taxes
Subsidies
Technology
Discoveries of new reserves of raw material

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5
Q

What is Price Elasticity of Supply?

A

Is the sensitivity of supply of a product to change in its price

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6
Q

What is the formula of PES?

A

Percentage change in QS / Percantage change in price

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7
Q

How to interpret results of PES?

A

PES always has a positive value because price and quantity move in the same direction, since the supply curve is upward sloping

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8
Q

When is supply price inelastic?

A

When the value of PES is between 0 and 1

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9
Q

When is supply price elastic?

A

When the value of PES is greater than 1

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10
Q

When is supply unit elastic?

A

When the value of PES is equal to 1

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11
Q

When is supply perfectly price inelastic?

A

When the value of PES is 0

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12
Q

When is supply perfectly price elastic?

A

When the value of PES is infinity

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13
Q

What are the factors that influence price elasticity of supply?

A

Time
Stocks
Spare capacity
Availability and cost of switching resources from one use to another

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