3B Supply

supply

amount of goods available

law of supply

the higher the price, the larger the quantity produced

quantity supplied

describes how much of a good is offered for sale at a specific price

rising prices

suppliers see chance to make more money so they work harder to produce

falling prices

suppliers are discouraged from producing as much as before

number of suppliers

as prices rise, new firms are drawn into market and add to quantity supplied of the good

elasticity of supply

how firms will respond to changes in the price of a good

time

has biggest effect on elasticity of supply

short run

firms cannot easily change output level, so supply is inelastic

long run

firms are more flexible, so supply can become more elastic

marginal product of labor

change in output from hiring one additional worker

increasing marginal returns

occur when marginal production levels increase with new investment

diminishing marginal returns

occur when marginal production levels decrease with new investment

negative marginal returns

occur when the marginal product of labor becomes negative

fixed cost

costs that do not change, regardless of production

variable costs

costs that rise or fall depending on production

total cost

fixed costs and variable costs combined

marginal cost

cost of producing 1 more unit of a good

shutdown decision

must weigh operating costs against the future

rise in input cost

fall in supply at all price levels

drop in input cost

increase in supply at all price levels

gov influence

can encourage or discourage an entrepreneur/industry by raising or lowering cost of producing goods

subsidies

gov money to a business to help them keep prices low, can cause supply of good to increase

excise taxes

tax on production or sale of good used to discourage use of harmful things

regulation

gov intervention in a market that affects the price, quantity, or quality of a good; occurs mostly with food safety and consumer products

global economy and supply changes

supply of imported goods and services has an impact on the same goods and services here

expectations of higher prices

reduce supply now and increase supply later

expectations of lower prices

raise supply now and decrease supply later

location, location, location

most important business words

important location aspects

highways, rail, waterways, supplier and consumer proximity

excise tax

indirect tax charged by the government on specific goods, services, and activities rather than on general retail sales

fixed cost

business expense that stays the same no matter how many products you make or sell

operating cost

everyday money a business spends to keep running

regulation

an official rule or doer—usually issued by a government agency—that controls how people or businesses behave and operate with the force of law

subsidy

financial help from the government that gives money or tax breaks to a business or person to lower costs and encourage certain actions

supply curve

graph that shows how a price change affects the amount of a product that producers are willing to sell

supply schedule

simple table that shows how much of a product producers are willing to sell at different price levels