Supply (Y12) Flashcards
(20 cards)
Supply meaning?
Willing and able to sell it.
Clarification about the supply curve:
- if we assume producers want to maximise their profits
- supply curve doesn’t tell us anything about why the prices has increased
- just tells us what would happen if price was to increase .
Quantity supplied increases at higher prices because:
Quantity supplied increases at higher prices because producers see that they can make profit selling their goods at higher prices, so they have more incentive to supply when the price is higher, increasing quantity supplied.
Quantity supplied decreases at lower prices because:
Quantity supplied decreases at lower prices because producers realise they’ll make less profit selling their goods at these lower prices, so they have less incentive to supply when the price is lower, decreasing quantity supplied.
extension in supply:
price goes up qs increases
contraction in supply:
price goes down qs decreases
price elasticity of supply meaning?
measures the responsiveness of quantity supplied to a change in price.
pes formula:
% change in qs / % change in price
pes interpretation:
always positive
how does spare capacity affect PES?
lots of spare capacity - if prices goes up - qs would be able to increase by a larger amount of percentage - so it would respond to a change in price (elastic)
little spare capacity - if prices go up - quantity supplied wont be able to respond much to a change in price. (inelastic)
how does availability of factors of production affect PES?
easy to find resources - if price rises - increases supply easily - elastic
price goes up - struggle to increase supply - inelastic
how does the state of the economy affect PES?
bad economy - factors available (e.g labour) - elastic
good economy - factors already in use - inelastic.
stockpile?
stock of goods held in reserve
how does stockpiles and perishability affect PES?
large stockpiles - prices go up - immediately respond - elastic
cant be stockpiled - if price rises - wont be able to respond much - inelastic
How short is the short run? And how long is the long run?
In the context of production, the short run is when at least one factor of production is fixed. The long run is when all factors of production can be changed.
how does time affect PES?
short run - fixed factors of production - hard to change quantity supplied - inelastic
long run - can change factors of production - able to respond - elastic
factors which influenced PES?
TEASS
TIME
ECONOMY
AVAILABILITY OF FACTORS OF PRODUCTION
STOCKPILES AND PERISHABILITY
SPARE CAPACITY
conditions of supply?
technology
weather
costs
number of suppliers
productivity
how does costs affect supply?
if the goods price went up - less profit - supply decreases vice versa
if the good price went up - cant afford much goods - supply decreases vice versa
how does number of suppliers and productivity affect supply?
increased productivity increases supply
decreased productivity decreases supply
