T1 Supply

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Explain what is meant by a movement along a supply curve
.A movement in a supply curve is a change in supply as a result of a change in price
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Explain what is meant by a shift in the supply curve.
.A shift in a supply curve is a change in supply for a reason other than a change in price
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Give factors that may cause a shift in the supply curve
Costs of production e.g. petrol, wages for telephonist (higher costs >> less profit). Technology e.g. from horse to motor car (quicker, can serve more customers). Government legislation e.g taxi licence, car insurance. Taxes and subsidies
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Explain what is meant by the price elasticity of supply
Price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price.
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Explain what is meant by a perfectly elastic supply curve
When Pes = infinity. Perfectly elastic supply exists when any change in product price, no matter how minuscule, causes the supply for the product to immediately fall to zero.
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Explain what is meant by a perfectly inelastic supply curve
When Pes = 0, supply is perfectly inelastic. Perfectly inelastic supply occurs when a change in price has no effect on the quantity supplied
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Explain what is meant by relatively elastic supply curve
.When Pes > 1, then supply is price elastic
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Explain what is meant by relatively inelastic supply curve
When Pes < 1. Supply is relatively price inelastic if a change in price causes a smaller percentage change in supply.
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Give facts thats influences price elasticity of supply
Spare production capacity (full = inelastic). Stock of finished products and component. Ease and costs of factor substitution. Time period and production speed
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Explain the disticntion betwee short run and long run in elasticit of suply
.Supply will be more inelastic in the short term as it takes time to invest and increase size of a factory. Long term, firms can increase size of factory and supply will be more responsive
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Explain the rationing function
prices serve to ration scarce resources when demand in a market outstrips supply.
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Explain the incentive funtion
low prices will discourage producers from producing and encourage consumers to buy, and vice versa with high prices
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Explain the signalling function
if prices are rising because of stronger demand from consumers, this is a signal to suppliers to expand output to meet the higher demand.
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Explain what is meant by consumer surplus
the difference between the consumers' willingness to pay for a commodity and the actual price paid by them, or the equilibrium price.
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Explain what is meant by produce surplus
Producer surplus measures the difference between the price firms are willing to sell the good for and the market price it is sold at. It is the area above the supply curve and below the equilibrium price.
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Illustrate a producer surpus with a d&s diagram
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Illustrate a consumer surplus with a d&s diagram
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Explain how changes in supply might affect producer surplus
Lower supply means producers surplus reduces
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Explain how changes in supply might affect consumer surplus
Lower supply means consumer surplus reduces
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Explain how changes in demand might affect producer surplus
Higher demand means producers surplus expands vv
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Explain how changes in demand might affect consumer surplus
Higher demand means consumer surplus expands vv
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Give the fomulae to calculate price elasticity of supply
.Elasticity = % Change In Quantity / % Change In Price
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Define dupply
describes the total amount of a specific good or service that is available to consume
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Other cards in this set

Card 2

Front

Explain what is meant by a shift in the supply curve.

Back

.A shift in a supply curve is a change in supply for a reason other than a change in price

Card 3

Front

Give factors that may cause a shift in the supply curve

Back

Preview of the front of card 3

Card 4

Front

Explain what is meant by the price elasticity of supply

Back

Preview of the front of card 4

Card 5

Front

Explain what is meant by a perfectly elastic supply curve

Back

Preview of the front of card 5
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