Theme 1.2.2: Supply Flashcards
Supply
The amount of a good or service that producers are willing and able to provide at a range of different price levels
Market Supply
Total output of all individual suppliers of a particular good or service. Producers decide how much they are willing and able to supply at a given price. Based on the cost of inputs and amount of profit they are likely to make, together with any objectives they have
As price rises….
Quantity supplied rises
As price lowers….
Quantity supplied lowered
Supply Curve
Shows the relationship between the price and the quantity of the product that producers want to create and sell
What does a Supply Curve show?
Total amount of a product supplied to the market by all producers at a range of different prices. Despite the name, it is usually represented as a straight line
What causes a change in supply?
. When there is a decrease in quantity demanded, the supply curve shifts left
. When there is a increase in quantity demanded, the supply curve shifts right
The Supply Curve shifts right, what has happened?
Quantity Demanded has increased
The Supply Curve shifts left, what has happened?
Quantity Demanded has decreased
How does a change in the cost of production effect supply?
. If costs increase, it is less profitable to produce the product thus less is supplied so Supply Curve shifts left
. If costs decrease, it is more profitable so producers respond by increasing output thus Supply Curve shifts right
How does the introduction of new technology effect supply?
Technological progress allows business to produce a product at a lower cost. This increases amount supplied at that price thus, Supply Curve shifts to the right
How does Indirect Tax effect supply?
An increase in tax on a product means price for the consumer rises. At any level of output the price is higher thus the demand curve shifts to the left
How does a Government Subsidy effect supply?
Subsidies are payments that encourage producers to make more, this product can then be sold at a lower price so shifts right
External Shocks
The supply of some goods is beyond the control of producer e.g a crop harvest fails, amount supplied is lowered. There is a shift to the left as their is a decrease in quantity supplied
What does a lower price mean for Supply
Lower prices means producers are less inclined to produce things to this market due to less profit being in it, causes a movement along the supply curve
