Topic 10&11-the Supply Curve

Question 0

Supply

Answer 0

Refers to the amount supplied by producers at given prices over a certain period of time.

Question 1

A rise in price will cause

A fall in price will cause

Answer 1

Increaae in the quantity supplied
(Extension)

Decrease in the quantity supplied
(Contraction in supply)

Question 2

PES>1

Answer 2

Elastic

Question 3

Factors which cause a shift in supply curve

Answer 3

-costs of productions
-New technology and new inventions
-taxes
-subsidy:
-discoveries of new reserves of a raw material
-productivity of the workforce
prices of other goods
an increase in number of producers

Question 4

Pes=1

Answer 4

Unit elastic

Question 5

PES=0-1

Answer 5

Inelastic

Question 6

Factors which cause a shift in supply curve:
Production costs
New Technology of production

Answer 6

• (wages, raw materials, energy and rent)
• a decrease in costs of production>firms can supply more at each price.
• right shift in supply
• firms can produce more cost effectively
• Improvements in tech would reduce firms costs>increase supply and cause it to shift to the right

Question 7

Factors influencing PES

Answer 7

• Spare production capacity
• Stock of finished products and components
• Technology and machinery =elastic
• supply may be fixed
• perishable goods
• when suppliers can store stock which doesn’t run out of date=elastic

Question 8

Factors which cause a shift in supply curve:
Taxes on goods
subsidies

Answer 8

• if the gov impose a specific tax on g/s the tax paid y consumers will be higher than the revenue received by firms> firms will supply less
• given to firms to encourage production of a good and to reduce a firms costs>right shift in supply

Question 9

Factors influencing PES:
Spare production capacity
stock of finished products
Technology and machinery

Answer 9

• if a firm has spare capacity then they can increase output without a rise in costs and supply of g/s=Elastic. Supply of goods=elastic in recession as there is alot of spare labour&resources
• if stocks of raw materials and finished products are at a high level firms can respond to a chance in price eval: perishable
• ^in tech&machinery can make firms more flexible=elastic

Question 10

Factors which cause a shift in supply curve:
prices of other goods
an increase in number of producers
productivity of workforce
discoveries of new reserves of a raw material

Answer 10

• if prices of goods increased>^ profit and therefore may switch to the production of that good
• will cause a increase in supply
• rise in productivity lead to right shift
• e.g country finds new oil reserves>^supply

Question 11

Factors influencing PES:
fixed supply
perishable goods
Good which do not run out of date

Answer 11

• supply may be fixed>no matter how much prices increase by, firms cannot supply more=inelastic
• firms will have an incentive to sell goods at any price that need to be sold asap =elastic
• when suppliers can store stock which doesn’t run out of date=elastic