Supply Flashcards
(6 cards)
1
Q
Supply
A
- The quantity of goods and services produced by a firm at any given price
- The objective of a firm is to maximize profit
- At high prices there is a greater incentive for firms to supply goods and services (as they would make more profit per unit sold)
- This has nothing to do with demand: supply represents the desired output of firms
2
Q
Supply curve
A
- It has a positive relationship between price and quantity
- Increase in price will lead to increase in the quantity supplied
- Decrease in price will lead to decrease in supply
3
Q
What determines the level of supply
A
- The price of goods
- The cost of inputs (raw materials and labor)
- Changes in technology
- The level of taxation/ subsidy
- Expectations
- The weather
4
Q
Theory behind the supply curve
A
- At low prices, only the most efficient producers make profit
- As prices rise, more producers can make a profit and begin to produce
- Existing firms increase production
5
Q
What is a market
A
The market for a good or service consist of all those producers willing and able to supply it and all those consumers willing and able to demand it
6
Q
Equilibrium
A
Equilibrium occurs at the point where supply and demand meet
