supply Flashcards
(16 cards)
what is quantity supplied?
quantity supplied is the amount that producers plan to sell during a given time at a particular price
what is law of supply?
the law of supply states that the higher the price of good, the greater quantity supplied
the lower price of good, the lesser quantity supplied
what is the relationship between prices and quantity supplied?
direct relationship
why firms are only willing to increase quantity supplied at a higher price?
they need to cover their higher marginal cost
define supply curve
supply curve shows the various quantities of a product sellers are willing and able to sell at a possible price at given time period
how to draw supply curve?
upward sloping
why is supply curve upward sloping?
there is a direct relationship between price and quantity supplied
what are the non-price determinants of supply
number of sellers
technology
taxes and subsidy
expectations of producers
price of other goods firm can produce
resource prices
when price increase, quantity supplied increase. what movement does this cause?
upward movement along the supply curve
why a downward movement is observed along the supply curve?
when price decrease, quantity supplied decrease
how does non-price determinant affect change in supply? (number of sellers)
when number of sellers increase, supply increase
when the number of sellers decrease, supply decrease
how does non-price determinant affect change in supply (technology)
when technology increase, supply increase
how does non-price determinant affect change in supply? (expectations of sellers)
expectations concerning the future price of a product
how does non-price determinant affect change in supply? (resource prices)
when resource prices increase, cost of production increase, supply decrease
how does non-price determinant affect change in supply? (price of other goods firms can produce)
substitute: when 2 goods are competing for the same resources
eg. chicken meat and eggs
compliments: when 1 good is produced, another is produced at the same time
eg. chicken meat and feather dusters
how does non-price determinant affect change in supply? (taxes and subsidy)
taxes imposed by government: cost of production increase, price increase, supply decrease
payment by government (subsidy): cost of production decrease, price decrease, supply increase
