Supply
Definition: The amount of a product offered for sale across all potential market prices.
Law of Supply
Principle: Suppliers typically offer more products for sale at higher prices and less at lower prices.
Supply Schedule
Definition: A list detailing the quantities of a specific product available for sale at various market prices.
Supply Curve
Definition: A graphical representation of the quantities supplied at different price levels.
Market Supply Curve
Definition: Represents total quantities offered by all firms in a market at various prices.
Quantity Supplied
Definition: The specific amount producers offer in the market at a given price.
Change in Quantity Supplied
Definition: Fluctuations in the amount offered for sale due to price changes.
Change in Supply
Definition: Occurs when suppliers present different quantities for sale across all price levels.
Productivity
Definition: Increases when management motivates workers or improves worker efficiency.
Subsidy
Definition: A government payment designed to encourage or safeguard a particular economic activity.
Supply Elasticity
Definition: Measures responsiveness of quantity supplied to price changes.
Theory of Production
Definition: The relationship between production factors and output levels of goods/services.
Short Run Production
Definition: A timeframe allowing changes only in variable inputs (e.g., labor).
Long Run Production
Definition: A period long enough to modify all inputs, including capital resources.
The Law of Variable Proportions
Definition: In the short run, output changes as one input varies while others remain constant.
Production Function
Definition: Describes the output relationship based on varying a single input while others stay constant.
Raw Materials
Definition: Unprocessed natural products utilized in production processes.
Total Product
Definition: Overall output produced by a firm.
Marginal Product
Definition: The additional output from adding one more unit of a variable input.
Three Stages of Production
Stages: 1) Increasing Returns, 2) Diminishing Returns, 3) Negative Returns.
Diminishing Returns
Definition: Stage where output rises at a decreasing rate with more units of a variable input.
Fixed Cost
Definition: Costs incurred by a business, even when output is zero.
Variable Costs
Definition: Costs that change with varying operational rates or output levels.
Marginal Cost
Definition: Additional costs created by producing one more unit.
Total Revenue
Definition: The sum of fixed and variable costs combined.
Marginal Revenue
Definition: Extra revenue linked to producing and selling one additional output unit.
Marginal Analysis
Definition: A decision-making process comparing additional benefits to additional costs of an action.
Break-even Point
Definition: The total output needed to cover total production costs.
Profit-maximizing Quantity of Output
Condition: Achieved when marginal cost equals marginal revenue.
Relationship between Marginal Cost and Total Cost
Marginal cost contributes to total cost; every addition from marginal cost adds to total cost.
Measures of Cost
Four measures: Total cost, Fixed cost, Variable cost, Marginal cost.
Impact of Aluminum Price Drop on Bicycle Supply
Fall in aluminum price (constant other variables): Demand for bicycles increases as producers can produce at lower costs, enhancing profits.
Effect of Price Decrease on Firm's Product Offering
According to the Law of Supply, lower prices result in reduced product offerings by the firm.
Impact of Diminishing Returns on Production Costs
Diminishing returns affect production costs variably; some costs adjust based on performance while others remain fixed.
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