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micro economics > SUPPLY > Flashcards

SUPPLY Flashcards

1
Q

what is supply

A

the quantity of a good or service that producers are willing and able to sell at any given price in a given period of time.

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2
Q

what is a firm

A

an organisation that brings together factors of production in order to produce output

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3
Q

what are the four forms firms can take

A

sole proprietor
partnership
private joint stock companies
public joint stock companies

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4
Q

what is a sole proprietor

A

when the owner of the firm also runs the firm

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5
Q

what is a partnership

A

when profits and debts are shared between partners

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6
Q

what is a private joint stock company

A

a company owned by shareholders who are invited

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7
Q

what is a public joint tock company

A

a company owned by shareholders where shares are sold on the stock exchange

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8
Q

what is an assumptions about firms

A

they aim to maximise profits

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9
Q

what is a supply curve

A

a graph showing the quantity supplied at any given price

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10
Q

what is a competitive market

A

a market when an individual firm cannot influence the price of the good or the service they are selling because of competition from other firms

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11
Q

what is an individual supply curve

A

the amount an individual firm is willing and able to supply at any given time period

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12
Q

what is a market supply curve

A

shows the total amount of product that firms are willing and able to supply at a given price in a given time period.

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13
Q

what price will firms want to sell goods at (ceteris paribus)

A

high prices

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14
Q

what is on the x axis of a supply graph

A

quantity per period

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15
Q

what is on the y axis of a supply graph

A

price

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16
Q

what will firms do if the price of a good decreases

A

they will find it less profitable to supply the good and will reduce the supply - causing movement along the curve

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17
Q

what influences the quantity firms are willing to supply

A

production costs
the technology of production
taxes and subsidies
prices of other goods
expected prices
number of firms in the market

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18
Q

if firms are aiming to maximise profits what do they need to use

A

the four inputs (4 factors of production)

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19
Q

if the cost of inputs increases what are firms expected to do

A

expected to supply less

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20
Q

if technology is introduced what happens

A

firms produce more cost-efficiently causing a shift to the right

21
Q

what happens when taxes increase (firms)

A

the price paid by the consumers is larger than the revenue received by the firm so firms will supply less

22
Q

what happens when firms get a subsidy

A

this reduces the firms costs so the firms will supply more

23
Q

if the price of your good increases what might customers do

A

switch to a cheaper substitute - but higher prices is good as it raises profitability for the firm

24
Q

how do expected prices affect firms

A

they make decisions based on future prices e.g. allowing stock to build up in anticipation of higher price.

25
Q

if firms join the market what’ll happen to the supply curve

A

it will shift to the right

26
Q

if firms leave the market what’ll happen to the supply curve

A

it will shift to the left.

27
Q

what is a cartel

A

an agreement between firms in a market on price and output with the intention of maximising their joint profits.

28
Q

if there is a change in market price what will happen to the supply curve

A

a movement along the curve will be induced - an extension or contraction

29
Q

if there is a change in any other factors what will happen to the supply curve

A

a shift will be induced

30
Q

what are the three reasons that the supply curves are drawn sloping down

A

the profit motive
Costs of production
new entrants coming into the market

31
Q

what is the profit motive

A

if the market price rises following an increase in demand it becomes more profitable for a business to increase their output

32
Q

what is production and costs

A

when output expands, production costs tend to rise so a higher price is needed to cover theses costs. This may be due to diminishing returns as more factor inputs are added to production

33
Q

Why do new entrants coming into the market

A

higher prices may create an incentive for other businesses to enter a market leading to an increase in total supply.

34
Q

what is supply extension

A

a rise in the market price brings about an extension of supply - producers are responding to the profit motive

35
Q

what is supply contraction

A

if market prices fall we expect to see a contraction of supply as producers have less incentive to produce at lower prices.

36
Q

what is market supply

A

total supply brought to the market by producers at each price.

37
Q

how do you calculate market supply

A

you sum all of the individual markets supplies together.

38
Q

what are the causes of shifts in the market supply curve

A

changes in unit costs of production
a fall in exchange rate
advances in production technologies
the entry of nr producers
taxes, subsidies and government regulations
favourable weather conditions

39
Q

what does lower unit costs mean

A

that a business can supply more at each price e.g. higher productivity - outward shift

40
Q

what does higher unit costs mean

A

that a business can supply less at each price e.g. a rise in wage rates or increase in energy prices/raw materials - inward shift

41
Q

what does a depreciated exchange rate mean

A

an increase in prices of imported components/ raw materials - inward shift

42
Q

what shift does having advances in production technology mean

A

an outward shift of supply

43
Q

what does the entrance of competitors do to the supply curve

A

outward sift - as there are more suppliers

44
Q

what do taxes cause

A

an inward shift of supply

45
Q

what do subsidies cause

A

an outward shift of supply

46
Q

what do regulations increasing costs do

A

cause an inward shift on supply

47
Q

what do favourable weather conditions affect

A

agricultural products

48
Q

what is joint supply

A

where an increase or decrease in the supply of one good leads to an increase or decrease in the supply of a by-product

49
Q

What is a cartel

A

cartels mean a group of suppliers may act as if they were one supplier and restrict supply in the market

micro economics (13 decks)

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