Economics- Chapter 5

supply

the amount of a product that would be offered for sale at all possible prices that could prevail in the market

law of supply

principle that suppliers will normally offer more for sale at high prices and less at lower prices

supply schedule

a listing of the various quantities of a particular product supplied at all possible prices in the market

supply curve

a graph showing the various quantities supplied at all possible prices that might prevail in the market at any given time

market supply curve

supply curve that shows the quantities offered at various prices by all firms that offer the product for sale in a given market

quantity supplied

the amount that producers bring to market at any given price

change in quantity supplied

the change in amount offered for sale in response to a change in price

change in supply

suppliers offer different amounts of products for sale at all possible prices in the market

subsidy

a government payment to an individual, business, or other group to encourage or protect a certain type of economic activity

supply elasticity

a measure of the way in which the quantity supplied responds to a change in price

production function

a figure that shows how total output changes when the amount of a single variable input (usually labor) changes while all other inputs are held constant

short run

a period so brief that only the amount of the variable input can be changed

long run

a period long enough for the firm to adjust the quantities of all productive resources

total product

the total output produced by the firm

marginal product

the extra output or change in total product caused by adding one more unit of variable input

1.) increasing returns

2.) diminishing returns

3.) negative returns

What are the 3 stages of production?

diminishing returns

the stage where output increases at a diminishing rate as more variable inputs are added

fixed costs

the costs that an organization incurs even if there is little or no activity

supply

the various quantities of a good or service producers are willing and able to sell at all possible prices at a particular time

quantity supplied

the name given to the specific amount producers plan to sell at a particular price

supply curve

the two dimensional graphic model of the relationship between price and quantity supplied

law of supply

states that as price rises, the quantity supply also rises; vice versa

price effect

What is another name for the law of supply?

higher prices cover higher costs of production

Why does the law of supply work the way it does?

supply schedule

chart that provides a list of all of the various prices and quantities supplied

direct

What kind of relationship is there between price and quantity when dealing with supply?

costs

Supply is always based on a firm's ________.

elasticity

defined as the degree of responsiveness that producers have to a change in price of a product

supply is all possibilities at a particular price; quantity supplied is a specific number at a price

What is the difference between supply and quantity supplied?

change in price

What leads to a change in quantity supplied?

other than price

A change in supply occurs when something _________ ________ _________ leads to a change in selling decisions.

decreases

What happens to supply when the cost of production increases?

short run

the production period in which there is only enough time to change the variable input of labor

1.) total product rises

2.) marginal product rises

3.) increasing returns

What takes place during Stage I of the production function?

1.) total product slows

2.) marginal product decreases

3.) diminishing returns

What takes place during Stage II of the production function?

1.) total product decreases

2.) marginal product is negative

3.) negative returns

What takes place during stage III of the production function?

Stage II

During what stage will producers want to produce?

break-even point

The point at which the total cost and total revenue are equal

maximize

At the point where marginal cost and marginal revenue are equal, a producer will _________ profits.

quick, easy, and inexpensive to produce more

When is a product's supply elastic?

slow, difficult, and expensive to produce more

When is a product's supply inelastic?

up to the right

What direction does a supply curve slope?

strong

When a product is elastic, the price effect is _______.

weak

When a product is inelastic, the price effect is _______.

unit elastic

a change in price causes a proportional change in quantities supplied

short run

time period in which you only have time to change the number of workers

long run

time period in which you have time to change everything other than the number of workers

law of variable proportions

as you add an additional unit of input (one worker), you should expect varying levels of output; eventually makes things worse

production function

describes the relationship between changes in output to different amounts of a single input while others are held constant

break-even point

point where the total cost equals the total revenue

profit-maximize quantity of output

when the marginal cost equals the marginal revenue