The Determinants Of Supply

Question 1

Define supply

Answer 1

When you are both willing and able to supply at a given price and period in time

Question 2

Does quantity supplied change with price, yes or no?

Answer 2

Yes

Question 3

What do higher prices imply on the supply curve

Answer 3

Higher prices on a supply curve imply quantity supplied will increase

Question 4

Why does quantity supplied increase, not decrease, at higher prices

Answer 4

because producers see that they can make profit selling their goods at higher prices, so they have more incentive to supply when the price is higher - maximise profit

Question 5

Why does quantity supplied decrease, not increase at lower prices

Answer 5

because producers realise they’ll make less profit selling their goods at these lower prices, so they have less incentive to supply when the price is lower

Question 6

Why does the supply curve slope upwards?

Answer 6

because when price goes up, quantity supplied increases

Question 7

What is a contraction in supply

Answer 7

when price goes down, producers will decrease the quantity supplied

Question 8

What is an extension in supply?

Answer 8

When price goes up, producers will increase the quantity supplied

Question 9

State the 7 factors shifting the supply curve?

Answer 9

(PINTSWC)
- productivity
- indirect tax
- number of suppliers/ firms
- technology
- subsidies
- weather
- costs

Question 10

Shifts in supply: define productivity

Answer 10

Productivity - how much output can be produced with a given set of inputs

Question 11

Shifts in supply: state how an increase and decrease in productivity will shift supply

Answer 11

• increased productivity: we would be able to supply more + firms a average costs fall and so out supply curve shifts out
• decrease productivity: If workers get bored form doing the same task repeatedly, workers productivity may fall as they become demotivated and disinterested in their job. Supply will shift to the left

Question 12

Shifts in supply: define indirect tax

Answer 12

a tax paid by the supplier on units of a good/service sold

Question 13

Shifts in supply: state how indirect tax can cause a shift in supply

Answer 13

An indirect tax increases production/ supply costs for producers. Therefore, producers supply less = inward shift

Question 14

Shifts in supply: state how the number of suppliers/ firms in a market shift supply?

Answer 14

• If the number of suppliers increase, supply will increase = more suppliers in the market = shifting the supply curve out
• If the number of suppliers decrease, the supply will decrease = less suppliers in the market = shifting the supply curve inwards

Question 15

Shifts in supply: how does technology cause shifts in supply?

Answer 15

• new technology = able to supply more = outward shift
• old/outdated technology = will not be able to supply as much = inward shift

Question 16

Shifts in supply: define subsidies

Answer 16

a payment from the government to lower the cost of production

Question 17

Shifts in supply: how does a subsidy cause a shift in supply?

Answer 17

• government subsidy = reduce firms per unit cost of production = firm is willing to produce more

Question 18

Shifts in supply: how does weather cause shifts in supply?

Answer 18

(particularly for agricultural produce):
- bad weather =producers are less able to supply.
- Favourable/ good conditions = increase supply.

Question 19

Shifts in supply: costs

Answer 19

• costs of production increases, producing will be more costly = firms make less profit + firms may decide to supply a cheaper alternative = may not be able to afford supplying current good/ service = supply of the original factor decreases
• costs of production fall, the firm can afford to
  supply more

Question 20

State another word for shifts in supply

Answer 20

Conditions of supply