Supply Flashcards
What is supply?
Supply is the quantity of a good/service producers are willing and able to produce at a given price in a given time.
What does the law of supply state?
It states that theres a direct relation between quantity supplied and price if we assume ceteris paribus.
Why is the supply curve upwards sloping?
Profit motive
What are some non price factors that can effect supply?
Productivity
Indirect tax
Technology
Subsidy
Costs of production
What does Price Elasticity of Supply measure?
It measures the responsiveness of quantity supplied given a change in price.
How do you calculate PES?
% change in quantity supplied/ % change in price
What are the different outcomes of PES?
> 1 Supply is price elastic
<1 Supply is price inelastic
1 Supply is perfectly price elastic
0 Supply is perfectly price inelastic
