Supply Flashcards
What is the law of supply
there is a direct relationship b/w price and qty supplied
Price goes up then supply goes up
(think from the producer perspective)
If the price increases for milk, what happens to the qty supplied
it will increase
the price is an incentive to the farmers to produce more milk
Supply curve is ____________sloping
upward
change in price is a ________–along the supply curve
movement, it does not shift it
Increase in supply, what happens to the supply curve
shifts right
decrease in supply, what happens to the supply curve
shifts left
What are the 5 shifters of supply
- price of resources
- # of producers
- technology
- taxes and subsidies
- expectations
Change in price of resources (inputs)
Huge increase in price of cows, what happens to supply
it would decrease supply and shift the supply curve
of producers - out of nowhere there is an increase in dairy farmers what happens to the supply curve
that would increase the supply of milk and vice versa
change in technology that would affect technology
- new advanced milking machines
this will increase production and increase in supply
Government involvement (taxes and subsidies)
if taxes go up what happens to supply
supply goes down (Shfits supply curve)
Government involvement (taxes and subsidies)
If subsides goes up, what happens to the supply curve
subsidies go up, then supply goes up
Gov. gives $ to produce more
Future expectations
think they can make more profit in the future (few weeks), what happens to the supply curve
they will hold back supply until that time, supply will decrease and shift
What happnes to supply for a product when the price increases
NOTHING! Remember, a change in price only affects QTY supplied. It does not shift the supply curve
