Supply Flashcards
1
Q
Law of supply
A
Supply is the quantity of a good or service that a producer is willing and able to supply onto the market at a given price in a given time period
2
Q
Effect of price on supply
A
As price of a good or service increases the amount producers are willing and able to supply increases
3
Q
Why does the supply curve slope upwards
A
- Ceteris paribus, rising prices acts as an incentive for producers to expand output - the potential for higher profits
4
Q
The supply curve
A
5
Q
Causes of shifts in market supply (STEPBACK)
A
- Subsidies (farming in UK)
- Taxes (cigarettes, plastic bags)
- Efficiency of production (more efficient production = outwards shift
- Producers (number of raw materials
- Business costs (rent/ costs of raw materials)
- Alternative production methods (new ideas + innovation)
- Climate
- Technology
6
Q
How taxes shift the supply curve
A
Specific tax = The tax remains the same no matter what the price (tax on cigarettes is the same amount no matter the brand)
AD valorem Tax = the amount of tax rises as the price rises, for example VAT (same percentage of the price)
7
Q
AD valorem diagram
A
8
Q
Specific tax diagram
A
