Supply
· Supply - the
quantity of a good or service that firms are willing and able to sell at any
possible price in a given period.
Law of Supply: ceteris paribus, as the price of a good increases, the quantity supplied increases. So there is a direct relationship between quantity supplied and price.
·
Movements along (expansion/contraction)
Movements along (expansion/contraction)
A movement up the supply curve is an expansion (both price + quantity increase)
A movement down the supply curve is a contraction (both price + quantity decrease)
·
Factors that shift the curve outwards:
-
A decrease in cost of production, which can be
caused by technological innovation, or a decrease in the price of land,
capital, labour.
-
A decrease
in the price of supply substitutes. Supply
substitutes are goods and services that can be produced with similar
factors of production (e.g corn and wheat)
If the price of corn decreases, firms will increase
the supply of wheat, as it is more financially attractive, and firms are driven
by profit.
-
An increase
in the price of a joint supply good.
Joint supply
are goods and services that can be produced together. (e.g price of beef rises, more cattle are raised, more
are killed and more leather can be produced.)
-
A decrease
in taxes, as there is more incentive to produce if goods don’t get taxed as
heavily.
-
An increase
in subsidies (a sum of money granted by the government to help an
industry/business keep the price of a commodity or service low), as firms gain
from making each additional good.
-
If producers expect their prices to increase in
the near future, they will produce more, so supply will increase, but not
necessarily sell right away.
NB: only for
non-perishables.
Comments
Post a Comment