Supply

Question 1

Define supply

Answer 1

Supply is the amount of a good/service that suppliers are willing and able to supply at any given price

Question 2

Name 2 reasons why the supply curve may shift

Answer 2

1. GVMT intervention

2. Changes in the cost of production

Question 3

Define price elasticity of supply (PES)

Answer 3

POS measures the responsiveness of supply to a change in price

Question 4

How do you work out PES

Answer 4

POS = (% change in QS) divided by (% change in P)

Question 5

Name three influencers of PES

Answer 5

1. Time period
2. Availability of stock
3. Spare capacity of FOP

Question 6

How does the long and short run effect price elasticity

Answer 6

In the short run, products are more inelastic as it takes time to produce. However, in the long run they’ll be more elastic as their is more of the goods/services.