Supply

Question 1

Definition of supply

Answer 1

The willingness and ability of producers to supply a quantity of a good or service at a given price in a given time period

Question 2

Law of supply

Answer 2

As price increases, supply increases

Question 3

Non price determinants of supply

Answer 3

• Cost of FOP – e.g. depletion of resources, increase in rent of a factory
• Improvement in technology
• Natural Disasters
• Expectations of future price changes
• Price of other goods –
-Producer substitutes e.g. muffins and cookies – if the price of muffins increases, the supply of cookies will decrease (shift left)
-Joint supply e.g. leather and beef (things that come from the same thing) - if the price of beef increases, the supply of leather will increase (shift right)
• Changes in Government Policies –
-tax (shift left)
-subsidy (shift right)
-laws and regulations e.g. anti-pollution policies
(anything that makes it easier to produce shifts right)