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Questions and Answers
What happens to the quantity of a good or service that producers are willing to supply as the price of the good or service increases?
How do production costs affect the quantity that producers are willing to supply?
What effect can advances in technology have on production and supply?
What is the term used for factors that influence the quantity of a good or service that producers are willing and able to offer for sale?
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What relationship is expressed by the law of supply?
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Study Notes
Supply Dynamics
- As the price of a good or service increases, producers are generally willing to supply a greater quantity due to the potential for higher revenue. This is known as the positive relationship between price and quantity supplied.
Impact of Production Costs
- Higher production costs can lead to a decrease in the quantity that producers are willing to supply, as their profit margins diminish. Conversely, lower production costs typically increase supply since profitability improves.
Technological Advancements
- Advances in technology can enhance production efficiency, often leading to reduced costs and increased supply. This allows producers to create more output at the same or lower cost, making them more competitive in the market.
Influencing Factors of Supply
- Factors that influence the quantity of a good or service that producers are willing and able to offer for sale are referred to as "supply determinants." These can include production costs, technology, taxes, subsidies, and the number of suppliers.
Law of Supply
- The law of supply expresses a direct relationship between price and quantity supplied: as the price of a good rises, the quantity supplied also increases, assuming all other factors remain constant. This reflects producers' response to market prices.
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Description
Test your knowledge of the determinants of supply with this quiz. Explore factors that influence the quantity of goods or services producers are willing to offer for sale, including the impact of price changes. See how well you understand the law of supply and its key determinants.
