Supply (Topic 3)

Question 1

Law of supply

Answer 1

Higher the price of a good the greater the quantity supplied (the other way also)

Question 2

Why the supply curve is positively sloped

Answer 2

There is a direct relationship between price and quantity supplied

Question 3

6 non-price determinants of supply

Answer 3

1) Number of sellers
2) Technology
3) Resource prices
4) Taxes and Subsidies
-Cost of production (increase or decrease)
5) Expectations of producers
-Expectations concerning the future price of a product
-When price is expected to increase -> current supply decrease (hold back) or supply increase (add workers)
6) Price of other goods the firm could produce
-Substitutes in production (competing for same resource, chicken and eggs)
-Complements in production (Produced at the same time, chicken and feather dusters)