How prices are determined - supply of goods + services

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9 Terms

1
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Supply

Amount of goods / services a producer / industry is willing + able to sell at a certain price

2
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Supply curve

A graphic representation of the correlation between cost of a good / service + the quantity supplied for a given period (bottom left to top right)

3
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Profit motive

The correlation between increased sales + increased profit (by selling more, more profit will be made)

4
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Extension of supply

An increase in the quantity of supply (upward movement on the supply curve)

5
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Contraction of supply

A decrease in the quantity of supply (downward movement on the supply curve)

6
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Ceteris Paribus

A latin phrase “all other things being unchanged or constant “ (no change in anything else)

7
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What are the factors that cause shifts in the supply curve?

  • Productivity

  • Indirect Tax

  • Number of Other Firms

  • Technology

  • Subsidies / support

  • Weather

  • Costs of production

8
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What causes movement along the supply curve?

A change in price

9
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What causes a shift along the supply curve?

Non-financial factors