Supply Flashcards
What is supply?
Supply is the willingness and ability that producers have to able to produce a quantity of a good or service at different prices in a given time period.
What is the law of supply?
The law of supply states that as prices increase, the quantity supplied will increase, ceteris paribus, the supply curve slopes upwards.
How can supply be illustrated?
Through a supply schedule, table, supply curve, graph, which both show the relationship between the price of a product and the quantity supplied.
What does “change in the quantity supplied” mean?
It differentiates a change in price from the effect of a change in any of the other determinants of supply.
What are the producers main goal(s)?
Maximize profits, since higher prices translate into higher profits, they might want to increase supply to take advantage of higher potential profits.
What are the non-price determinants of supply?
All determinants can either shift the demand curve to the left or right, always with ceteris paribus assumption.
How does the cost of FOPs affect supply?
Say, for example, a firm that produces textiles was notified that it must increase wages, this means that firm costs increase which translate that they supply less, vice versa.
How do related goods affect supply?
If producers can produce two goods at the same time, competitive supply, and one price of one good change, a shift in supply changes as well, skate boards and roller skates. But sometimes, because one good is produced, the other is produced at the same time, joint supply. For example, sugar and molasses, if the quantity supplied increases in sugar, the quantity supplied for molasses also increases.
How does government intervention affect supply?
Governments can either implement indirect taxes or subsidies. Indirect taxes are taxes that are added to the price of a product, which increases the FOPs, leading to a shift to the supply curve left. And subsidies, payments that are made by the government to firms to lessen their FOPs, leads to a shift to the downside (right).
How do expectation of future prices affect supply?
If producers expect higher demand, supply increases, and vice versa.
How do changes in technology affect supply?
Mostly a shift of the supply curve to the right, as technology usually advances rather than sets back.
What is the distinction between a movement along a supply curve and a shift of the supply curve?
A change in the price of a good itself leads to a movement along the curve, while a change in any of the other determinants will lead to a shift in the supply curve.
What is market supply?
Supply being measured in a specific market with a group of producers, also known as many producers in one market, using horizontal swimming.
