Economics Chapter 5 Supply Key Terms
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Questions and Answers

What is the definition of supply?

  • The amount of goods available (correct)
  • The total cost of production
  • The quality of goods available
  • The legal restrictions on goods

    • 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?

  • A graph showing the quantity supplied
  • A measure of production costs
  • A chart that lists how much of a good a supplier will offer at different prices (correct)
  • A curve indicating demand

    • What is meant by variable in economics?

    <p>A factor that can change.</p> Signup and view all the answers

    What is a market supply schedule?

    <p>A chart that lists how much of a good all suppliers will offer at different prices</p> Signup and view all the answers

    What does the supply curve represent?

    <p>A graph of the quantity supplied of a good at different prices.</p> Signup and view all the answers

    Define elasticity of supply.

    <p>A measure of how quantity supplied reacts to a change in price.</p> Signup and view all the answers

    What is an example of inelastic supply?

    <p>Orange grove</p> Signup and view all the answers

    What best describes elastic supply?

    <p>Industries can easily alter production</p> Signup and view all the answers

    What does marginal product of labor indicate?

    <p>The change in output from hiring one additional unit of labor.</p> Signup and view all the answers

    What are fixed costs?

    <p>Costs that do not change regardless of how much of a good is produced.</p> Signup and view all the answers

    What happens to marginal cost?

    <p>It is the cost of producing one more unit of a good.</p> Signup and view all the answers

    What is a subsidy?

    <p>A government payment that supports a business</p> Signup and view all the answers

    What does the term inflation refer to?

    <p>A condition of rising prices.</p> Signup and view all the answers

    Study Notes

    • 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.

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