Alevel economics, topic 2.3, supply

microeconomics

what does supply mean?

the amount of product that producers are willing and able to sell at any given price in a given period of time

what does a supply curve show?

the relationship between price and quantity supplied

what shape is a supply curve?

a straight line upward from the origin

why does it slope upward?

because as price of the product rises, firms/produces will make more product. This is because as the price of production stays the same and price of product increases, the firm will make more profit. And a firm’s most important goal is to make profit. Profit is paramount.

what’s the relationship between price and quantity on a supply curve?

directly proportional

what does an increase in price of product result in?

an extension along the supply curve (a movement along the curve)

what does a decrease in price cause?

a contraction along the supply curve

what is individual supply?

the supply of each individual producer at each price

what is market supply?

the sum of all supply schedules of all producers in the industry

how can we remember what factors cause a shift in the supply curve?

PINTSWC

what does PINTSWC stand for?

productivity, indirect tax, number of firms, subsidies, weather, cost of production

productivity meaning?

output per factor input
if there’s more output per factor input, then you get more productivity, and more supply as a result.

what are indirect taxes?

these are a tax on production, aka an exercise duty
these are placed on producers, meaning they will reduce production

number of firms meaning?

when there’s more firms there’s more supply, this causes a supply curve to shift to the right

what does technology mean?

technology could be robotics or AI, it makes production faster meaning that supply increases and the curve shifts to the right

what does subsidies mean?

payment that the government gives to firms to encourage production. They increase supply as the firm can lower the price and still not lose to much money. Plus incentive

weather meaning?

this is in terms of agriculture and crops that’re grown. If there’s bad weather and bad harvest, there’s low supply

what is cost of production?

what it says on the tin. If its too high, then the firm will have less profit from the product if the price isn’t very high too. This will shift the supply curve to the left.

what is joint demand?

this occurs when two goods are produced together from the same factor of production. An example is lamb and wool.

what is competitive supply?

these are alternative goods that a firm could make the same factors of production. e.g. a farmer planting potatoes instead of carrots