Ch 5 - Supply

Competition

________: if another product is produced with higher profit, supply for existing product decreases.

Variable factor

________: employment increases as output increases.

Supply curve

________: represents the relationship between the price and the quantity supplied of a product.

Total product

________: total output that a firm producers using variable and fixed factors in a given time period.

**Supply**

the quantity of a good or service that producers are willing and able to supply at different prices in a given time period

**Law of supply**

as the price of a product rises, the quantity supplied of the product will eventually increase

\n **Supply curve**

represents the relationship between the price and the quantity supplied of a product

**Non-price determinants of supply**

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Changes in factors of production: (supply shifts to left) →  land, labour, capital, entrepreneurship

Expectations

supply increases if product is expected to gain profit 

Competition

if another product is produced with higher profit, supply for existing product decreases

**The law of diminishing marginal returns**

as more variable factors are added to a given quantity fixed factors, holding tech constant, marginal product eventually drops

**Fixed factor**

employment remains constant 

**Variable factor**

employment increases as output increases 

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Total product

total output that a firm producers using variable and fixed factors in a given time period

Marginal product

change in total product as a result of change in input

Supply

the quantity of a good or service that producers are willing and able to supply at different prices in a given time period

Law of supply

as the price of a product rises, the quantity supplied of the product will eventually increase

Expectations

supply increases if product is expected to gain profit

The law of diminishing marginal returns

as more variable factors are added to a given quantity fixed factors, holding tech constant, marginal product eventually drops

Fixed factor

employment remains constant

Short run

period with fixed + variable factors

Long run

period when all factors are variable

Total product

total output that a firm producers using variable and fixed factors in a given time period

Average product

output that is produced, an average, by each unit of the variable factor