T5 Supply

Question 1

What relationship does price and quantity supplied?

Answer 1

Price and quantity supplies is a direct relationship.
Suppliers will increase their supply if they make more profit
They reduce supply at lower price

Question 2

What happens to supply when cost production increases?

Answer 2

The cost production increases (raw materials and wages).
The supply curve will move to the left as less production is made

Question 3

Factors leading to change in supply?

Answer 3

• cost of production
• taxes - when taxes are increased supply curve will go from S to S2
• government subsidies - subsidies from government encourage them to produce a particular product. Can also help reduce production costs
  -external shocks

Question 4

How does lower unit cost affect supply?

Answer 4

Lower unit costs mean that a business can supply more at each price
Lower unit costs = competitive advantage
Higher unit costs cause an inward shift of supply curve