Edexcel AS Economics unit 1

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  • Created by: lucy
  • Created on: 21-04-14 07:52

Supply

A movement along the supply curve

Is caused by a change in price. An extension in supply is a movement up the curve. A contraction in supply is a movement down the curve. Follows the law of supply which states that as price rises firm supply more and as price falls they supply less.

Shifts in the supply curve

Cost of production: - if the costs of producing goods and serivce go down then the company will supply more - because their profit will rise. Alternativley. if costs go up supply will fall. Curve shifts left if curve goes down.

New technology - if new technology is introduced then the firm can produce more efficiently, and therefore costs will go down. supply shifts right and profit rises.

Subsidies - a subsidy  is a grant or financial reward goverments pay firms to produce more. Supply shifts right because costs fall and profits rise.

If generally, market price for cabbage is higher he might switch to growing cabbages.

Raw materials discovered - if you were to discover oil or gas e.g. recent developments in the artic sea (Russia), fracking in south england - curve shifts right,

 



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