Unit 2.2 Supply

Question 1

Supply

Answer 1

The quantity of a good or service producers are willing and able to produce at a given price in a given time period

Question 2

Law of supply

Answer 2

There is a direct relationship between price and quantity. As price increases, quantity supplied increases and vice versa assuming ceteris paribus

Question 3

Acronym of non price determinants that affect supply

Answer 3

PINTSWC

Factors that affect costs of production
A reduction in cost of production will shift supply curve to the right and vice versa

P-roductivity (if workers are more productive, cost of production decreases, shifting curve right)
I-ndirect tax (increase in tax shift curve left and vice versa)
N-o. of firms (As more firms enter a market, the supply in the market increases and as firms leave a market, the supply falls)
T- echnology (improvement in technology moves supply to the right du eot lower cost of prodcutioin and vice versa)
S- ubsidy (increase in subsidy shift supply right as cost of production decreases and vice versa)
W- eather (good weather e.g. farming rain shift right)
C-osts of production (transport, oil, labour, raw material, utilities, rent, regulation all of those can increase cost of produciton causing shift curve left)

Question 4

Why is there a direct relationship between supply and quantity

Answer 4

Profit motive, as price goes up there is potentially mroe profit to be made if the can produce more and sell more, if there is a strong incentive if prices go up to produce more and supply more

Question 5

Join supply

Answer 5

Increase in production of one good will increase the supply of another good (could be because the second good could be a biproduct of the first good being produced (e.g. milk and cheese, or beef and leather)