Supply

Question 1

what are the functions of price

Answer 1

ration - consumers
incentivise - producers
signalling - entrepreneurs to other markets

Question 2

define supply

Answer 2

the amount offered for sale by producers at each given price level

Question 3

define extension

Answer 3

rise in prices increases quantity supplied

Question 4

define contraction

Answer 4

fall in price, fall in quantity supplied

Question 5

determinants of supply

Answer 5

raw materials, labour costs, tech, regulation, labour productivity, subsidies, indirect taxes, joint supply

Question 6

define joint supply

Answer 6

increase/decrease in supply of one good leads to increase/decrease in supply of a by-product

Question 7

define pes

Answer 7

measures responsiveness of QS to changes in the price

Question 8

price elastic

Answer 8

greater than 1

Question 9

price inelastic

Answer 9

less than 1 but greater than 0

Question 10

perfectly inelastic

Answer 10

0

Question 11

perfectly elastic

Answer 11

infinity

Question 12

unitary

Answer 12

1

Question 13

define equilibrium

Answer 13

price where demand equals to supply and there is no tendency for change

Question 14

define disequilibrium

Answer 14

price at which market supply does not equal demand likely to be further change or reaction by buyers/sellers.

Question 15

factors affecting pes

Answer 15

• time
• raw materials
• availability of stocks
• ease of switching between alternative production
• spare capacity