supply Flashcards
the supply curve, price elasticity of supply
law of supply
As the price of a good increases, the quantity supplied by producers also tends to increase, ceteris paribus (all other factors remaining constant).
why does price direct supply?
for profit motives, if price increases suppliers can cover the rising cost of production as unit rises and make similar or higher profit margins
what effects shift of supply
non price factors
why do non price factors affect shift of supply
non price factors typically effect cost of production. so of cop increases, then supply curve will shift to the left as willingness to supply decreases and vice versa
what does the supply curve represent
willingness to supply
factors of movement of supply curve
change in price
factors of shift of supply curve (7)
- cost of production
- technological advancements
- tax (direct like corporation, indirect like VAT)
- subsidy
- substitutes (prices and discovery)
- complimentary
- climate and weather conditions
factors influencing PES (TASCA Meets Capacity)
- the time period
- availability on stock / perish-ability
- mobility of factors of production
- legal constraints
- capacity
effect of PES in short term
In the short run, supply is typically less elastic
Since some factors are fixed, producers have limited options to increase production
effect of PES in long term
In the long run, supply is typically more elastic. With all factors of production variable, producers have more flexibility to respond to price changes.
