Summary
Summary Unit 2b - Business Economics supply
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- Institution
a) Factors leading to a change in supply: o changesinthecostsofproduction o introductionofnewtechnology o indirect taxes o government subsidies o external shocks
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1.2.2Supply
¥ Supply is the amount of a good or service that
producers are willing and able to sell at any given
price
¥ Producers are those people that create and supply
goods and services to a market
¥ A supply curve is a graphical representation of the
relationship between price and quantity
¥ The supply curve shows the quantity supplied for a
good or service, at any given price, over a period
of time
¤ As price falls quantity supplied decreases
¤ As price rises quantity supplied increases
Rules for drawing a supply curve:
i) label the y axis price and the x axis quantity
ii) draw the supply curve upward sloping from left to
right and label it supply (or S)
iii) to find the quantity supplied at any given price
a) select a price (P), shown on the y axis
b) draw a dotted line towards the supply curve
c) draw a dotted line down towards the x axis to
show quantity (Q)
Changes in cost of production
¥ Costs of production are created by the price of
factor inputs i.e. the factors of production
¥ If the cost of producing a good or service increases
it will become more expensive to supply the
product
¤ This will lead to some firms reducing output
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