1.2.2 Supply

What is supply?

The quantity of a good or service a producer is willing and able to make available in the market, at a given price, over a given period of time

What factors can lead to a change in supply?

Government subsidies

External shocks

New technology

Indirect taxes

Changes in cost of production

What are government subsidies?

Payments from the government to encourage more suppliers to enter the market and supply more

What could some external shocks be?

Global pandemics - COVID

Labour law changes - minimum wage, length of working week

Oil price changes - affects transportation costs

War - don’t want to supply to a country at war

Weather issues - bad for crops

Why is new technology beneficial for a business?

Can produce more so supply increases

Mass production methods improve and capacity increases

Costs can be reduced and prices can lower

What are indirect taxes?

Forms of tax collected by an intermediary (middleman)

What are some forms of indirect taxes?

VAT

Excise tax

Customs tax (tax on goods imported into the country)

What happens if the cost of production increases?

Less is produced

Prices increase

Lower sales