Supply and the supply curve

Question 1

What is supply?

Answer 1

the quantity of a good/service producers are willing and able to produce at a given price

Question 2

Why do producers have a profit motive when price or quantity increases?

Answer 2

if a price goes up, there is potentially more profit to be made if they can produce and sell more and if they produce more, they want higher prices to maintain their profits

Question 3

What is the law of supply?

Answer 3

there is a direct relationship between price and quantity supplied

Question 4

What is an extension in supply?

Answer 4

when an increase in price leads to an increase in quantity supplied

Question 5

What does INSPECTOR WJ stand for and what do these factors affect?

Answer 5

Indirect tax, No. of sellers/firms in the market, Subsidies (money given by the government), Productivity of labour, Expectations of future prices, Cost of raw materials, Technological improvements, Objectives of firms, Regulations, Wage rates, Joint supply. these factors affect the costs of production and so shift supply

Question 6

How do costs of production affect the supply curve?

Answer 6

a reduction in costs of production will shift supply to the right, whereas an increase in costs of production will shift supply to the left as producers are less willing and able to produce at the same price

Question 7

What is joint supply?

Answer 7

where an increase in supply of one good leads to an increase in supply of another (tends to be a by-product e.g. beef & leather)