Supply

Question 1

What is the most common incentive for an entrepreneur to supply?

Answer 1

The potential for profit

Question 2

Describe a supply curve

Answer 2

Slope upward from left to right, showing less will be supplied at a low price and more will be supplied at a high price

Question 3

Define short run in terms of supply theory

Answer 3

The time period in which the quantity of atleast one component in production can’t be changed

Question 4

Define long run in terms of supply theory

Answer 4

The time period in which the quantities of all the factors of production can be changed

Question 5

State and describe the other determinants of supply aside from price

Answer 5

• production costs - if costs for up and nothing else changes, supplying the market becomes less profitable. Producers are likely to want a higher price for any given quantity, the the supply curve is likely to move up and to the left
• state of technology - new technology can reduce the need for labour and, despite being expensive, still reduces cost per unit of output as long as the quantities produced are large enough. Successful new technology will therefore shift the supply curve to the right
  Government intervention - this can alter the balance of revenue and constant adding indirect taxes or subsidies. The intention could be to reduce sales and/or raise tax revenue. Indirect taxes will increase the price for the consumer. Subsidies could lead to an increase in supply by offsetting production costs
• entry and exit of firms to the market - a profitable market attracts more producers. If it becomes unprofitable, firms will leave the market and supply will decrease
• weather - bad weather can negatively impact the supply of agricultural goods

Question 6

What is a commodity and why is oil a special type of commodity?

Answer 6

A commodity is natural resource. Oil is unique because it is not affected by natural conditions