Topic 3.3 The Determinants of the supply of goods and services

Question 1

Supply

Answer 1

Supply is the quantity of goods/services producers are able and willing to produce/supply at a given price level during a period of time.

Question 2

Law of supply

Answer 2

There is a direct relationship between price and supply (as price increases so does supply) due to the incentive of profit. If you increase P1 to P2, firms will output at P2 to generate more profit and increase Q1 to Q2, firms will want to charge a higher price to cover their costs of production

Question 3

Change in prices cause

Answer 3

Movements along the curve

Question 4

Main determinant of supply

Answer 4

Costs of production

Question 5

Determinants of supply

Answer 5

PINTSWC - These are non-price factors
P - Productivity
I - Indirect tax
N - number of firms (competition + more firms to supply goods)
T - technology
S - subsidies
W - weather
C - Costs of Production

Question 6

Costs of production analysis

Answer 6

If your costs of production as a firm are lower, your willing to supply more at the same price as you would have the same profit margins.

Question 7

Short-run supply

Answer 7

This is where we assume that atleast one factor of production is fixed (usually land or capital) within this time period

Question 8

Long-run supply

Answer 8

This is where we assume that all factors of production are variable.