Unit 1 - Chapter 4 Flashcards
The supply of goods and services
Market supply
The quantity of a good or service that all the firms in a market are willing to sell.
Supply
The quantity of a good or service that firms plan to sell at given prices in a given period of time.
Profit
Is the difference between total sales revenue and total costs of production.
Conditions of supply
A determinant of supply, other than the good’s own price, that fixes the position of the supply curve.
The main conditions of supply
1) Costs of production including:
- Wage cost
- Raw material costs
- Energy costs
- Costs of borrowing
2) Technical progress.
3) Taxes imposed on firms E.G. VAT..
4) Subsidies granted by the government to firms.
Decrease in supply
A leftward shift of the supply curve
Increase in supply
A rightward shift of the supply curve
Ad valorem tax
A percentage expenditure tax E.G. VAT
Expenditure tax
A tax levied by the government on spending by consumers. The firms selling the good pay the tax to the government, but consumers indirectly pay via the resulting price rise.
Unit tax or specific tax
A tax levied on a unit of a good, irrespective of the good’s price.
Subsidy
Money given by the government to firms to reduce the price and offset some of the costs of production.
Joint supply
Occurs when the production of one good leads also to the of a by-product E.G. Beef and leather.
Competing supply
When the production of one good prevents the production of another E.G. Bio fuels and food.
