micro Econ

  • Created by: meryemb12
  • Created on: 06-03-20 16:49

price of a good -factors determining the supply of

  • a rise in price will always lead to an increase in the quantity supplied of that good /service -called an extension of supply
  • This is because the increase in price incentivises the firm to increase output 
  • economists call this a positive relationship='the law of supply'
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price of a good -technology and production

  • a reduction in costs of production=lead to an increase in supply because producers profits had increased
  • technology can increase the efficiency of the productive process, this will reduce the costs of production which shifts the supply to the right 
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price of a good -productivity and tax

  • increased productivity=output per input of a factor of supply increases -supply shift to the right 
  • an indirect tax on supply raises the costs of production -shifts the supply to the left 
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factors determining supply

  • Tax 
  • Technology
  • Productivity
  • Price 
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the supply curve -shows the relationship between p

effect of tax on supply :

-taxes are deemed as a cost by businesses 

-higher cots =decrease supply 

-taxes = decrease supply 

the incentive to expand production:

-when a firm's profits increase, it is incentivised to produce more output, because the more it produces, the more it will earn

-when costs of production fall, a firm will be incentivised to supply a higher quantity at a given price.-shown by a rightward shift in the supply curve 

-subsidies lover firms average cost per unit -encourages them to expand production

causes of supply curve shifts :

-changes in the price of inputs -will affect the cost of production 

-new technology -allows firms to produce at a lower cost 

-changes in gov policy-taxes /subsidies

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