Questions and Answers
What is the definition of supply?
What does the law of supply state?
Suppliers tend to offer more of a good at a higher price; as the price increases, the quantity supplied increases, and vice versa.
What is a supply schedule?
What is meant by variable in economics?
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What is a market supply schedule?
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What does the supply curve represent?
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Define elasticity of supply.
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What is an example of inelastic supply?
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What best describes elastic supply?
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What does marginal product of labor indicate?
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What are fixed costs?
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What happens to marginal cost?
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What is a subsidy?
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What does the term inflation refer to?
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Study Notes
Supply and Related Concepts
- Supply: Refers to the total amount of goods available for sale in the market.
- Law of Supply: Indicates that suppliers are inclined to offer increased quantities of a good when prices rise, and conversely, supply decreases as prices fall.
- Quantity Supplied: The specific amount of a product that suppliers are willing to sell at a given price.
- Supply Schedule: A tabular representation detailing how much of a product will be supplied at various price points, illustrating the price-quantity relationship.
- Variable: Any factor that can change, affecting supply and demand dynamics.
Market Dynamics
- Market Supply Schedule: A comprehensive chart showing the total quantity of a good that all suppliers will offer at different prices in the market.
- Supply Curve: A graphical depiction of the quantity supplied at various price levels, with the horizontal axis showing the quantity supplied.
- Market Supply Curve: Represents the total quantity supplied by all suppliers at different prices; typically illustrates that higher prices incentivize greater output.
Elasticity and Production Response
- Elasticity of Supply: Measures how much the quantity supplied changes in response to price variations, indicating supplier responsiveness.
- Inelastic Supply: Describes industries that cannot easily adjust production levels; for instance, orange groves have fixed production capabilities.
- Elastic Supply: Industries that can readily change production levels, such as barber shops, reflect a more elastic supply.
- Unitary Elastic: A specific case where elasticity is exactly one, indicating proportional responsiveness in quantity supplied due to price change.
Labor and Production
- Marginal Product of Labor: Refers to the additional output generated from hiring one more labor unit.
- Increasing Marginal Returns: A situation where the marginal product of labor grows as the workforce expands, leading to more efficient production.
- Diminishing Marginal Returns: Occurs when adding more workers results in a decrease in the marginal product, suggesting inefficiencies.
Costs of Production
- Fixed Cost: Costs that remain constant regardless of production levels, such as rent or machinery maintenance.
- Variable Cost: Costs that fluctuate with production volume, including expenses for labor, utilities, and raw materials.
- Total Cost: The sum of fixed and variable costs, giving a complete view of production expenses.
- Marginal Cost: The expense incurred from producing one additional unit of a good, crucial for decision-making.
- Marginal Revenue: The extra income received from selling one more unit of a product; often equals the selling price.
Regulatory Factors and Economic Conditions
- Operating Cost: Encompasses all costs associated with running a facility, significant for overall profitability assessments.
- Subsidy: Government financial support aimed at assisting businesses or specific markets, often to promote production.
- Excise Tax: A government-imposed tax on specific goods during their production or sale, impacting pricing strategies.
- Regulation: Government interventions that influence market conditions, affecting production quantities, costs, and quality.
- Inflation: An economic condition characterized by general rising prices, impacting supply and demand decisions.
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Description
Test your knowledge with key terms from Chapter 5 on Supply in Economics. This quiz features essential concepts like supply, law of supply, and quantity supplied. Perfect for reviewing important definitions and understanding the mechanics of market supply.