Supply &PES Flashcards
Why does a supply curve slope upwards
Profit
Production costs
New firms
What are movements along the supply curve caused by
A change in price of that good
Why does higher prices = supply expansion
Producers are responding to profit motive
Why does lower prices= supply contraction
Producers have less incentive to produce at lower prices
Why does the supply curve shift to the right
There is an increase in supply
Why does the supply curve shift to the left
A decrease in supply
What are the factors causing the supply curve to shift
Productivity Indirect taxes Number of firms Technology Subsidies Weather Cost of production
How does productivity cause the supply curve to shift and which way
If productivity increases a firm can increase the quantity supplied.
Right
How does indirect taxes cause the supply curve to shift and which way
Indirect taxes can cause an increase in production costs e.g petrol
Left
How does the number of firms cause the supply curve to shift and what way
If more firms enter the market to supply a good overall supply will increase
Right
How does technology cause the supply curve to shift and which way
Improvements in production technology can lead to increases in supply.
Right
How does subsidies cause the supply curve to shift and which way
If a firm receives government subsidies cost will fall
Right
How does weather cause the supply curve to shift and which way
Good weather means good harvest-right
Poor weather means poor harvest -left
How does cost of production cause the supply curve to shift and which way
Lower costs means more supply- right
More costs means less supply- left
What does pes measure
The responsiveness of the quantity supplied to a change in the price of a good
