Supply - CELL

What are the factors of production?

• Capital

• Enterprise

• Land

• Labour

What is capital?

Money

What is enterprise?

Ideas

What is land?

Where the business operates

What is labour?

People that work

What happens when the cost of one factor of production rises?

All of the costs rise

What affects the cost of production?

• New technology

• Indirect taxes

• Subsidies

• External shocks

What would new technology do to the cost of production?

Decrease it as the process is more efficient

What would indirect taxes do to the cost of production?

Increase it as there is an extra charge

What are subsidies?

Encouraging/discouraging suppliers to produce products

What do subsidies do to the cost of production?

Decrease it

What are external shocks?

Unexpected events outside of business control that have a direct affect on supply

What are examples of external shocks?

• Natural disasters

• Terrorist attacks

• Outbreak of disease

What is a type of indirect tax?

VAT

What does VAT stand for?

Value Added Tax

Why is VAT added?

To fund the government’s spending