All Flashcards
Differentiate between 'change in supply' and 'change in quantity supplied'.
Change in supply is a shift of the entire curve; change in quantity supplied is a movement along the curve due to a price change.
Compare the effects of a change in resource costs versus a change in technology on the supply curve.
Both shift the supply curve; lower resource costs and improved technology increase supply (shift right).
Contrast the impact of taxes and subsidies on the supply curve.
Taxes decrease supply (shift left); subsidies increase supply (shift right).
Compare the effects of an increase in the price of a substitute good in production versus an increase in the number of suppliers on the supply of the original good.
An increase in the price of a substitute good decreases the supply of the original good, while an increase in the number of suppliers increases the supply of the original good.
What is the difference between a supply schedule and a supply curve?
A supply schedule is a table showing the relationship between price and quantity supplied, while a supply curve is a graphical representation of this relationship.
Compare the effects of a price floor and a price ceiling on quantity supplied.
A price floor set above the equilibrium price increases quantity supplied, leading to a surplus. A price ceiling set below the equilibrium price decreases quantity supplied, leading to a shortage.
Contrast the effects of an increase in demand versus an increase in supply on equilibrium price.
An increase in demand increases equilibrium price, while an increase in supply decreases equilibrium price (assuming the other remains constant).
Differentiate between short-run supply and long-run supply.
Short-run supply is more inelastic because firms have fixed inputs. Long-run supply is more elastic as firms can adjust all inputs.
Compare the impact of a specific tax (fixed amount per unit) versus an ad valorem tax (percentage of price) on the supply curve.
Both shift the supply curve to the left, but an ad valorem tax causes a greater shift at higher prices.
Contrast the effects of an increase in wages on the supply of labor versus the supply of goods.
An increase in wages increases the supply of labor, but it decreases the supply of goods (because it increases production costs).
Define 'Supply'.
The various quantities of a good/service firms are willing and able to produce at different price levels.
Define 'Quantity Supplied'.
A specific amount of a good/service produced at a particular price; a single point on the supply curve.
What is the Law of Supply?
There is a direct (positive) relationship between price and quantity supplied.
Define 'Determinants of Supply'.
Factors that cause the entire supply curve to shift (increase or decrease).
What does 'Resources' refer to in the context of supply?
The cost of inputs (raw materials, labor, etc.) used in production.
What does 'Other goods prices' refer to in the context of supply?
The price of alternative goods a firm could produce instead.
What does 'Taxes' refer to in the context of supply?
Government levies that increase the cost of production.
What does 'Technology' refer to in the context of supply?
The methods and processes used in production.
What does 'Expectations' refer to in the context of supply?
Suppliers' beliefs about future prices.
What does 'Number of competitors' refer to in the context of supply?
The quantity of firms in the market.
What does a rightward shift of the supply curve indicate?
An increase in supply.
What does a leftward shift of the supply curve indicate?
A decrease in supply.
On a supply curve graph, what causes movement along the curve?
A change in the price of the good itself.
On a supply curve graph, what causes the entire curve to shift?
Changes in the determinants of supply (ROTTEN).
If a supply curve shifts to the right, what happens to the equilibrium price, assuming demand remains constant?
The equilibrium price decreases.
If a supply curve shifts to the left, what happens to the equilibrium quantity, assuming demand remains constant?
The equilibrium quantity decreases.
Describe the shape of a typical supply curve.
Upward sloping, indicating a positive relationship between price and quantity supplied.
What does a vertical supply curve represent?
Perfectly inelastic supply; quantity supplied does not change regardless of price.
What does a horizontal supply curve represent?
Perfectly elastic supply; producers are willing to supply any quantity at a given price.
How does a technological advancement appear on a supply curve graph?
As a rightward shift of the supply curve.