1.2.4 Supply

What is supply

The quantity of a good or service that a producer is willing and able to supply at any given price during a given period of time.

What is the law of supply

There is a direct relationship between price and quantity supplied. As price increases, quantity will increase

Why are supply curves upward sloping

There is a positive relationship between the quantity supplied and the price of the good

How does extension of supply occur

An increase in price along the supply curve

What will cause a contraction in supply?

A fall in price along the supply curve

What is increasing marginal cost

Firms will all have varying costs, for the industry this means that the cost of producing an additional unit of output rises as output increases

What will cause movement along supply curve

Changes in price

What are firms driven by

Desire to make larger profits

What are the factors that shift the supply curves

PINTSWC

PINTSWC- What does P stand for and mean

Productivity and higher productivity causes an outward shift in supply as average costs for firm fall

PINTSWC- What does I stand for and mean

Indirect taxes. Inward shift in supply

PINTSWC- What does N stand for and mean

Number of firms. The more firms there are, the larger the supply

PINTSWC- What does T stand for and mean

Technology. More advanced technology, outward shift in supply

PINTSWC- What does S stand for and mean

Subsidies. Causes an outward shift in supply

PINTSWC- What does W stand for and mean

Weather. Favourable conditions will increase supplu

PINTSWC- What does C stand for and mean

Costs of production- If this falls, the firm can afford to supply more. If this rises, there will be an inward shift of supply