1822795
Description
Flashcards by Amardeep Kumar, updated more than 1 year ago
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Created by Amardeep Kumar
almost 10 years ago
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| Question | Answer |
| Define supply. | Supply is the quantity that producers are willing to supply at different prices. |
| Describe the relationship between price and quantity supplied. | The relationship between price and quantity supplied is positive, meaning that a rise in price should in theory lead to a rise in supply. |
| How is an increase in supply shown on the supply curve? | An increase in supply will cause the supply curve to shift to the right (outwards). This means that producers are now willing to supply more at each existing price. |
| How is a decrease in supply shown on the supply curve? | A decrease in supply will cause the supply curve to shift to the left (inwards). This means that producers are only willing to supply less at each existing price. |
| How can lowering costs help a firm increase its production? | Firms can lower production costs by improving the quality of their workforce and exploiting economies of scale resulting in falling costs. If costs fall, the supply curve will shift to the right causing an increase in the quantity supplied. |
| How can higher costs cause a decrease in a firm's production? | Higher costs may incur because workers may demand higher wages, or the business may gain diseconomies of scale as it expands, causing the production costs to rise. As a result the supply curve will shift to the left causing a decrease in the quantity supplied. |
| How can the use of technology shift the supply curve to the right? | Technology allows the supplier to produce more goods because it is much more efficient compared to human workers. This is because it is cheaper to run as it doesn't require wages, and it does not need to rest because it does not experience exhaustion like humans. |
| What is the consequence of a new firm entering the market? | The consequence of new firms entering the market is that supply shifts to the right, as there are now more firms that are able to supply more at each existing price. |
| What is the consequence of firms leaving the market? | The consequence of firms leaving the market is that supply will shift to the left, as there are now less firms that will now supply less at each existing price. |
| What is supply tax and how does it decrease supply? | An excise tax is added to the price charged to the consumer by the supplier. The money made on excise taxes by the producer is then paid to the government, which as a result increases costs for the supplier. |
| What is the effect of a subsidy on supply? | A subsidy is a sum of money paid by the government to a producer to enable them to supply more without them having to raise the price. Therefore, a subsidy will shift the supply curve to the right, as the producer can now supply more at each available price. |
| How can government legislation decrease supply? | If a firm is forced to change its production methods, it may incur increased production costs and therefore cause a fall in supply. Furthermore, the introduction of a minimum wage will also mean higher costs for a firm. |
| How can government legislation increase supply? | Many markets such as gas, electric and telecommunications have been opened up by the government for new firms to enter. This is called deregulation, and it causes the supply curve to shift to the right as there is an increased number of firms in the market. |
| How can the climate affect supply? | The climate is particularly important in the supply of agricultural produce. Good weather will shift the supply curve to the right, whereas bad weather will shift supply to the left. |
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