Supply

Question 1

Define supply?

Answer 1

The quantity of a good/service that firms choose to sell at any given price in a given time period.

Question 2

What does supply graph look like?

Answer 2

Upward sloping linear graph (Read pg 4)

Question 3

List me 3 reasons why supply curve is upward sloping

Answer 3

1. Profit motive. 2. production and costs. 3. New entrants coming into markets.

Question 4

The Profit Motive (Reason why supply curve is upward sloping)

Answer 4

When market price rises, businesses find it more profitable to boost production.

Question 5

Production and Costs (reason why supply curve is upward sloping)

Answer 5

When output expands, production costs rises, therefore higher price is needed.

Question 6

New Entrants (reason why supply curve is upward sloping)

Answer 6

Higher prices create an incentive for other firms to enter the market, causing an increase in total supply.

Question 7

What’s fixed supply?

Answer 7

When supply is limited to a certain output, shown on straight vertical line on supply graph.