Supply Flashcards
What is the definition of supply?
Supply is the quantity of goods and services that firms are willing and able to provide/sell in a time period.
What does the Law of Supply state?
The law of supply states that there is a positive relationship between quantity supplied and price, ceteris paribus.
What is the law of diminishing marginal returns (in supply)?
As more units of a resource (like labor) are added, the additional output each new unit produces starts to fall, especially in the short run.
What are the assumptions underlying the law of supply?
The law of diminishing marginal returns.
Increasing marginal costs.
What is joint supply?
When producing one good automatically leads to the production of another, like chicken meat and eggs.
How does joint supply affect supply curves?
An increase in one good’s supply increases the other’s.
Both supply curves shift right.
What is competitive supply?
When producing more of one good means producing less of another, like choosing to grow either apples or oranges.
How does competitive supply affect supply curves?
An increase in one good’s supply decreases the other’s.
One supply curve shifts right, the other shifts left.
What are the non-price determinants of supply?
Changes in costs of factors of production
Prices of related goods:
Joint supply
Competitive supply
Indirect taxes and subsidies
Future price expectations
Changes in technology
Number of firms in the market
