Supply Flashcards
Supply of goods or services is
Different at different prices.
Why do supply curves usually slope upwards?
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.
What does increasing supply increase and why is this significant?
Increasing supply increases costs.
Firms will only produce more if the price of the good or service increases more than the extra costs.
Changes in supply cause
A shift in the supply curve
There are lots of factors that
Cause a shift in the supply curve.
Factors that cause a shift in the supply curve
Changes in the costs of production
Improvements in tech
Changes in the productivity of factors of production
Indirect taxes and subsidies
Changes in the price of other goods
Number of suppliers
Changes in the costs of production
Increase in costs of production shifts supply curve left decrease producers profits.
Vice versa
Improvements in technology
Increase supply as reduce costs of production
Changes to the productivity of factors of production
Increased productivity means more output from a unit of factor. Shifts it right
Indirect taxes and subsidies
Indirect tax increases costs for producer.
Subsidy on good encourages production as acts to reduce costs for producers.
Changes to the price of other goods made by the same firm.
If the price of good A made by a firm increases.
Might decide to reduce production of less profitable good B to increase supply of good A.
reduction in supply of good B.
Number of suppliers
Increase in number of suppliers in market will increase supply to market.
Decrease has reverse effect.
