SUPPLY Flashcards
what is supply
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.
what is a firm
an organisation that brings together factors of production in order to produce output
what are the four forms firms can take
sole proprietor
partnership
private joint stock companies
public joint stock companies
what is a sole proprietor
when the owner of the firm also runs the firm
what is a partnership
when profits and debts are shared between partners
what is a private joint stock company
a company owned by shareholders who are invited
what is a public joint tock company
a company owned by shareholders where shares are sold on the stock exchange
what is an assumptions about firms
they aim to maximise profits
what is a supply curve
a graph showing the quantity supplied at any given price
what is a competitive market
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
what is an individual supply curve
the amount an individual firm is willing and able to supply at any given time period
what is a market supply curve
shows the total amount of product that firms are willing and able to supply at a given price in a given time period.
what price will firms want to sell goods at (ceteris paribus)
high prices
what is on the x axis of a supply graph
quantity per period
what is on the y axis of a supply graph
price
what will firms do if the price of a good decreases
they will find it less profitable to supply the good and will reduce the supply - causing movement along the curve
what influences the quantity firms are willing to supply
production costs
the technology of production
taxes and subsidies
prices of other goods
expected prices
number of firms in the market
if firms are aiming to maximise profits what do they need to use
the four inputs (4 factors of production)
if the cost of inputs increases what are firms expected to do
expected to supply less
if technology is introduced what happens
firms produce more cost-efficiently causing a shift to the right
what happens when taxes increase (firms)
the price paid by the consumers is larger than the revenue received by the firm so firms will supply less
what happens when firms get a subsidy
this reduces the firms costs so the firms will supply more
if the price of your good increases what might customers do
switch to a cheaper substitute - but higher prices is good as it raises profitability for the firm
how do expected prices affect firms
they make decisions based on future prices e.g. allowing stock to build up in anticipation of higher price.
if firms join the market what’ll happen to the supply curve
it will shift to the right
if firms leave the market what’ll happen to the supply curve
it will shift to the left.
what is a cartel
an agreement between firms in a market on price and output with the intention of maximising their joint profits.
if there is a change in market price what will happen to the supply curve
a movement along the curve will be induced - an extension or contraction
if there is a change in any other factors what will happen to the supply curve
a shift will be induced
what are the three reasons that the supply curves are drawn sloping down
the profit motive
Costs of production
new entrants coming into the market
what is the profit motive
if the market price rises following an increase in demand it becomes more profitable for a business to increase their output
what is production and costs
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
Why do new entrants coming into the market
higher prices may create an incentive for other businesses to enter a market leading to an increase in total supply.
what is supply extension
a rise in the market price brings about an extension of supply - producers are responding to the profit motive
what is supply contraction
if market prices fall we expect to see a contraction of supply as producers have less incentive to produce at lower prices.
what is market supply
total supply brought to the market by producers at each price.
how do you calculate market supply
you sum all of the individual markets supplies together.
what are the causes of shifts in the market supply curve
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
what does lower unit costs mean
that a business can supply more at each price e.g. higher productivity - outward shift
what does higher unit costs mean
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
what does a depreciated exchange rate mean
an increase in prices of imported components/ raw materials - inward shift
what shift does having advances in production technology mean
an outward shift of supply
what does the entrance of competitors do to the supply curve
outward sift - as there are more suppliers
what do taxes cause
an inward shift of supply
what do subsidies cause
an outward shift of supply
what do regulations increasing costs do
cause an inward shift on supply
what do favourable weather conditions affect
agricultural products
what is joint supply
where an increase or decrease in the supply of one good leads to an increase or decrease in the supply of a by-product
What is a cartel
cartels mean a group of suppliers may act as if they were one supplier and restrict supply in the market
