Supply and the Supply Curve Flashcards
Q: How is supply defined in economics?
A: Supply is the quantity of a good or service that producers are willing and able to produce at a given price in a given time period.
Q: What does the law of supply state?
A: The law of supply states that there is a direct relationship between price and quantity supplied. As price increases, quantity supplied increases, and vice versa.
Q: How is the law of supply represented graphically?
(Refer to the image of the supply curve)
A: It is represented by an upward-sloping supply curve, which shows that as price rises, the quantity supplied also rises.
(Refer to the image of the supply curve)
Q: What happens when the price increases from P1 to P2 on the supply curve?
(Refer to the image of the supply curve)
A: When the price increases from P1 to P2, quantity supplied increases from Q1 to Q2, shown as an extension of supply.
(Refer to the image of the supply curve)
Q: What happens when the price decreases from P2 to P1 on the supply curve?
(Refer to the image of the supply curve)
A: When the price decreases from P2 to P1, quantity supplied decreases from Q2 to Q1, shown as a contraction of supply.
(Refer to the image of the contraction on the supply curve)
Q: Why do producers supply more when prices rise?
A: Producers supply more at higher prices because they are motivated by the potential for greater profits.
Q: What are non-price factors that can affect supply?
A: Non-price factors include productivity, indirect taxes, number of firms, technology, subsidies, weather, and costs of production.
Q: How do non-price factors shift the supply curve?
A: A positive non-price factor (like improved technology) shifts the supply curve to the right, increasing supply. A negative factor (like higher production costs) shifts it to the left, decreasing supply.
Q: What is the mnemonic to remember non-price factors affecting supply?
A: “PINTS WC” helps remember non-price factors: Productivity, Indirect taxes, Number of firms, Technology, Subsidies, Weather, and Costs of production.
