Supply Flashcards
List factors that shift the supply curve
3x C
2x I
1x N
Nutella chocolate indigestion
Changes in the costs of production
Improvements on technology
Changes to the productivity of factors of production
Indirect taxes and subsidies
Changes to the price of other goods
Number of suppliers
Changes in supply
Cause a shift in the supply curve
Supply of good or services is different at different prices.
What is the usual trend of a supply curve?
It usually slopes upwards this means that the higher the price charged for a good, the higher the quantity supplied. This is because producers and sellers aim to maximise their profits. Other things being equal the higher the price for a good or service the higher the profit. Higher profit provides an incentive to expand production and increase supply. Which explains why quantity supplied of a good/service increases with price.
What does increasing supply do to a firm and therefore what do firms normally do?
Increasing supply increases costs
Firms will therefore only produce more if the price increases by more than the costs.
What are the two key words to describe changes in quantity supplied due to price changes.
Extension in supply.
Contraction in supply.
Changes to costs of production
Increase in costs of production (wages, raw materials) decrease producers profits and cause supply curve to shift to the left.
If cost of production decreased moves to right.
Improvements in tech.
Increase supply as reduce costs of production.
Eg energy efficiency of commercial freezers could reduce energy cost of food company.
Changes to the productivity of factors of production
Increased productivity of a factor of production means that a company will get more output from a unit of the factor.
More productive staff shift to demand curve on right as leads to output increase.
Indirect taxes and subsidies
indirect tax on a good effectively increases costs for a producer. Supply reduced, supply curve shifts to left.
Subsidy on a good encourages its production as it acts to reduce costs for producers. Increased supply level right shift
Changes to price of a good
Price of one good made by a firm increases.
Firm might decide to switch production from a less profitable good to increase their production of the first good.
This decreases supply of the second good.
Number of suppliers.
Increase in suppliers in a market will increase supply to the market shifting supply curve to the right.
A decrease in the number of suppliers will lead to left shift to demand curve.
