MICRO - Supply Flashcards
(25 cards)
Define supply in economics :
The amount of goods or services producers are willing and able to sell at a given price and time.
What is the law of supply?
As price increases, quantity supplied rises; as price decreases, quantity supplied falls.
What is a supply curve?
A graph showing the relationship between price and quantity supplied.
What does a movement along the supply curve represent?
A change in price, causing expansion or contraction of supply.
What is an extension of supply?
A rise in price leads to higher quantity supplied, moving up the curve.
What is a contraction in supply?
A fall in price leads to a lower quantity supplied, moving down the curve.
Define market equilibrium :
the point where demand equal supply, setting the equilibrium price.
What causes a shift in the supply?
Non - price determinants such as production costs, technology , and governmental policy.
How do government subsides affect supply?
Subsidies reduce production costs, shifting the supply curve outward.
How do indirect taxes affect supply?
Taxes increase costs, shifting supply inward.
Define joint supply?
When two goods are produced together (beef and leather).
Define production costs as a supply determinant :
Higher costs reduce supply, while lower costs increase supply.
What is derived demand?
Demand for a good depends on demand for another product.
What is competitive supply?
When firms can produce one of two substitute goods, depending on profitability.
What is composite supply?
When a god has multiple uses, affecting its market availability.
What is the impact of future price expectations on supply?
If firms expect higher future prices, they reduce current supply to sell later.
How does technology affect supply?
Advancements improve efficiency, shifting supply outward.
What is elastic supply?
A small price change leads to a large change in quantity supplied.
Define perfectly inelastic supply :
Supply stays constant regardless of price changes. (rare artwork)
What causes inelastic supply?
Limited resources, production time constraints, or fixed capacity.
What is price elasticity of supply (PES) ?
The responsiveness of supply to a change in price.
What does unitary elastic supply mean?
When a 1% change in price leads to a 1% change in quantity supplied.
What is the price mechanism
how market forces (demand & supply) allocate resources efficiency.
How does market structure affect supply?
Monopoly firms control supply, while competitive markets have flexible output.
