Law of Supply Flashcards
1
Q
The law of supply
A
As price increases, quantity supplied increases
As price decreases, quantity supplied decreases
2
Q
Contraction in supply
A
As price decreases, quantity supplied decreases
3
Q
Expansion in supply
A
As price increases, quantity supplied increases
4
Q
Shifts in the supply curve
A
When a non-price supply factor increases/decreases supply at any given price
5
Q
The profit motive
A
Production costs remaining unchanged, a higher reltive price will usually mean high demand for a g/s and higher relative profits. Firms will then allocate resources there to maximise profits
6
Q
Opportunity Costs
A
When there are higher profits available, this increases the opportunity cost on not reallocating resources
