Theme 1.2.4/1.2.5 Supply (unit 11) Flashcards
Define supply.
Supply is the quantity of goods a that sellers are prepared to sell at any given price over a period of time,
What would happen if the price of wheat fell?
There would be less supply in the market aka a contraction in supply. But if the price of wheat increased then the would be an extension in supply.
What are the conditions of supply?
Other factors other than price such as income or the price of other goods. These changes will still result in a shift in quantity supplied.
What other factors effect quantity supplied?
- The goal of sellers
- Government legislation
- Expectations of future events
- Weather
- Producer cartels/ consortiums.
What is producer surplus?
Photo if possible.
The area above the supply curve and below the market price.
What is the price elasticity of supply?
% change in price
It is the relationship between increases in price and how this affects quantity supplied.
What are the determinates of price elasticity?
- Time (the shorter the time the harder it is to react to the price.)
- Ease to switch to production of other items.
- How easy it is to store stocks.
- If there is spare capacity to make more of a product.
What is short run?
It is the period of time when at least one factor input to the production process is fixed.
What is long run?
It is the period of time when all factor can be varied but the state of technology remains constant.
How could we increase supply at the same price?
- Reduce regulations on a market
- Introduce new technologies
