Chapter 8 - Supply Flashcards
in a competitive market, both sellers and buyers are?
are price takers.
Firm supply is
is the quantity of output a firm is willing and able to supply at a certain price.
The supply curve traces out all combinations of
(a) market price and (b) quantities that a firm is willing and able to sell at that price.
Firm supply is drawn
drawn changing the price of output, holding everything else that is relevant constant (ceteris paribus).
A firm should sell up until
P = MC
what is the price, P?
The marginal revenue (MR) for each unit that the firm sells
P > MC
firm should sell extra unit
P < MC
firm should sell fewer unit
As MC is often increasing, the quantity supplied in the market is
higher when price is higher
A movement along the supply curve when output price changes is called a
change in the quantity demanded
if output is increasing it is
or for decreasing?
‘an increase in the quantity demanded
‘a decrease in the quantity demanded’.
firm’s supply curve is given by
by its MC curve
As MC curve is upward sloping due to
to diminishing marginal product
a positive relationship between the price of a good and the quantity of that good supplied
This positive relationship is known as the
the law of supply
If there is a change in one of these factors there will be a?
a ‘change in supply’, either:
‘an increase in supply’ for shifts of the supply curve to the right (S1 to S2); or
‘a decrease in supply’ for shifts of supply to the left (S2 to S1).
