2.2

Question 1

supply

Answer 1

the quantity of a good or service that producers are willing and able to offer at various prices during a specific time period, ceteris paribus

Question 2

individual supply

Answer 2

the supply of one product from one firm at every price

Question 3

supply schedule

Answer 3

a table that shows the quantity supplied of a good or service at different prices

Question 4

the law of supply

Answer 4

as the price of a product increases, the quantity supplied will usually increase, ceteris paribus: the positive relationship between the price of a product and the quantity supplied of it explains the upward slope of the supply curve

Question 5

market supply

Answer 5

the sum of all the individual supplies of a product at every price

Question 6

what causes movements along the supply curve and shifts of the supply curve

Answer 6

price changes - movements along the curve
change in quantity supplied - movements along the curve
change in supply - shifts of the supply curve

Question 7

what are the non-price determinants of supply and shifts of supply curve

Answer 7

costs of production, technological change, prices of related goods (competitive supply), prices of related goods (joint supply), future expectations, the number of firms in the market, government interventions, shocks

Question 8

non-price determinants of supply

Answer 8

all factors affecting supply other than the price, causing the entire supply curve to shift

Question 9

costs of production

Answer 9

if there’s an increase in the cost of a factor of production (labour, capital, land, entrepreneurship) of a good or service - supply decreases - supply curve shifts inwards

Question 10

improvements of technology cause

Answer 10

increase of productivity and supply curve to shift outwards

Question 11

productivity

Answer 11

the quantity of output per unit of input

Question 12

competitive supply

Answer 12

if a firm sells good B more than a good A, demand for B is higher, so price of B is higher, so supply of B becomes higher and supply curve shifts outwards

Question 13

joint supply

Answer 13

when two or more goods are derived from the same product so that it is not possible to produce more of one without producing more of the other (cheese and butter)

Question 14

by-product

Answer 14

the second good in a joint supply

Question 15

expectations about the future prices and supply

Answer 15

hoarding - accumulating or storing a good or resource in order to prevent its release into a marker for self-use or profit-making purposes

Question 16

if people expect prices to increase

Answer 16

hoaring

Question 17

if people expect prices to decrease

Answer 17

increase supply do avoid lower prices and revenues in the future

Question 18

expectations about the future of economy and supply

Answer 18

business confidence; if economy does well, people will have more money to spend and consumption increases, so they increase supply, vice versa

Question 19

the number of firms in the market and supply

Answer 19

when the number of firms that offer the same good increases, the market supply also increases, shifting the supply curve of that good outwards

Question 20

government interventions and supply

Answer 20

indirect taxes, subsidies and regulations

Question 21

indirect taxes

Answer 21

tax imposed on a good or service; it is typically paid to the government by the producer o supplier and is considered a cost of production (like fuel tax)

Question 22

if indirect tax increases

Answer 22

the cost of supply increases, so supply decreases

Question 23

if indirect tax is eliminated

Answer 23

supply increases, so price for consumers decreases

Question 24

subsidy

Answer 24

the amount of money granted by the government to a form or industry (the opposite effect of taxes)

Question 25

regulations

Answer 25

a rule made by the government that requires certain behavior of individuals, firms or other groups (to protect consumers, workers’ health and safety, environment)

Question 26

shocks

Answer 26

sudden unpredictable events like wars, natural disasters, spilled oil in the sea, pandemics

Question 27

law of diminishing marginal returns

Answer 27

adding more of one factor of production (input), while holding at least one other factor of production constant, will at least at some point, yield lower marginal returns (output/product)

Question 28

what happens when supply and demand meet

Answer 28

they agree n the price; this is where exchange happens between consumers and producers; equilibrium

Question 29

consumer surplus

Answer 29

consumers’ willingness to pay (WTP) - price that consumers actually pay = benefit (utility) consumers get from paying a price lower than the one they’re willing to pay

Question 30

producer surplus

Answer 30

price that producers actually ask - producers’ willingness to accept (WTA) = benefit producers get from asking a price higher than the one they’re willing to accept

Question 31

social (community) surplus

Answer 31

consumer surplus + producer surplus = total benefit (utility) to society

Question 32

at market equilibrium in free markets:

Answer 32

social surplus is maximized , so market is socially efficient/ in a state of allocative efficiency = optimal (most efficient) allocation of resources