Supply (Week 2) Flashcards
What is the relationship between supply and quantity
Positive (direct)
What happens if the product has a high price value? (Sold at a high price)
The company produces a lot as they get more valued products, they get more money for them because they are produced for the same price but sold expensively
When is there excess demand
When the price is set low: firms produce very little as the low price isn’t worth it, but demand is high as the product is cheap
When is there excess supply
When the price is high: demand is low as customers do not want to buy an expensive product, yet firms want to produce a lot as because they can sell them at the expensive price- they are selling them for way more than their costs of production
What causes a shift in the demand curve
A change in the costs of production
What happens if the costs of production increases
The supply decreases
What happens if the costs of production decreases
The supply increases
What is the relationship between price and quantity
Negative (inverse)
What is the law of supply
As price decreases, supply decreases and vice versa (the relationship is direct/positive)
What causes a movement along the supply curve
Costs
What do you say about supply when price rises/falls
Expands/contracts
What do you say about supply when supply shifts to the right/left
Increases/decreases
