Flashcards in Chapter 4 Section Reviews Deck (11):
State the law of supply
The higher the price buyers are willing to pay, other things being constant, the greater the quantity a supplier will be willing to produce, and the inverse is true.
Which way does a supply curve slope and why?
To the right, which is a positive slope, indicating the greater the price buyers are willing to pay for the product, the greater quantity firms will supply.
What three factors could lead to a change in supply?
1. Changes in technology
2. Changes in production costs
3. Changes in the prices of related goods
At what point do supply and demand intersect?
The market equilibrium point
What occurs when the price of a product is higher than the price at which supply equals demand?
What is the simplest solution to a surplus?
Producer lowers the price until the quantity demanded equals the quantity he has to supply.
What condition causes a shortage, and what are its possible
A shortage is caused when a products price is lower than the market equilibrium price. The possible solutions are:
1. Discouraging demand for the product
2. Increasing the supply of the product
3. Allowing the price to rise to the equilibrium level
Who are suppliers?
All sellers of goods and services
What does a leftward shift in the supply curve indicate?
A decrease in supply
Do changes in technology cause an increase or a decrease in
Increase in supply