Supply 2 Flashcards
What is movement in supply curve
Movement in supply is only caused by change in price
What is shifts in supply curve
Caused by variety of factors causing it to shift left/right
How do natural conditions cause supply to shift
Good weather shift supply curve to right/vice versa.
How do technology cause supply to shift
New technology shift supply curve to right.
How do subsidies/tax cause supply to shift?
Subsidies shift supply curve to right/ Tax shift it to the left
What’s Joint Supply
Where an increase/decrease in supply of one good lead to an increase/decrease in supply of a by-product
What’s PES (Price Elasticity of Supply)
THe responsiveness of quantity supplied to a change in price.
Formula for PES (Price Elasticity of Supply)
% change in quantity supplied / % change in price
Value for Unitary/Inelastic/Elastic of supply
Same as Demand
How do Stock Levels affect PES (price elasticity of supply)
When stock level is high, firm can quickly respond by suppling more products, making supply more elastic.
How do ease of entry to market affect PES (Price elasticity of supply)
When entering the market is difficult, supply can’t increase quickly, so inelastic.
How do Production Speed affect PES (price elasticity of supply)
When production speed is slow, firms can’t respond quickly to sudden change, so more inelastic.
How do, how closely defined the products are affect PES (Price elasticity of supply)
if products are closely defined, it means less substitutes, so more inelastic
