supply Flashcards
Define supply.
The quantity of a good or service that a producer is willing to make available on the market at a given price over a given period of time.
How does price determine the level of supply?
As a price goes up on a product or service, a business will want to supply more in anticipation of higher profits.
How does cost of production determine the level of supply?
If the cost of production goes up (eg due to a rise in raw material prices or a rise in minimum wage) then the business may begin to produce less and put prices up, which will lower sales.
How does introduction of new technology determine the level of supply?
New technology means that more goods can be supplied.
Mechanisation and automation of production processes means supply can increase.
Mass production methods have improved to increase capacity.
Using new technology means that costs can be reduced and so they can offer lower prices to the customer.
How do indirect taxes determine the level of supply?
When the government increases tax on goods such as petrol then supply will decrease.
VAT/ custom tax ect. make supplying goods less attractive.
How do government subsidies determine levels of supply?
This is a payment from the government to encourage more suppliers to enter the market and supply more. Government subsidies increase supply because costs have been lowered thanks to the subsidy.
How do external shocks determine levels of supply?
External shocks may mean that the business does not want to supply at current levels. Examples of external shocks are changes in oil price, war, weather problems and changes in labour laws.
List the factors that impact levels of supply.
External shocks Goverment subsidies indirect taxes new technology cost of production price
