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Questions and Answers
What does the law of supply state?
The law of supply states that, all other factors being equal, as the price of a good or service increases, the quantity of goods or services that suppliers offer will increase, and vice versa.
Which factors can cause a shift in the supply curve? (Select all that apply)
Alfred Marshall was the first to develop the standard supply and demand graph.
True
Market saturation occurs when the volume of a product or service in a marketplace has been ____.
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Match the following concepts related to Equilibrium:
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Define Price Elasticity of Supply.
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What does the law of supply state?
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Which of the following factors influences the supply of a product? (Select all that apply)
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Market saturation occurs when the volume of a product or service in a marketplace has been minimized.
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The ______ price is the price at which the quantity demanded equals the quantity supplied.
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Match the following types of supply with their descriptions:
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Study Notes
Law of Supply
- The law of supply states that as the price of a good or service increases, the quantity of goods or services that suppliers offer will increase, and vice versa.
- The law of supply is a microeconomic law that describes the relationship between the price of a good or service and the quantity supplied.
- The law of supply is depicted by a supply curve, which is always upward sloping.
Factors Affecting Supply
- Price: a increase in price leads to an increase in supply, ceteris paribus.
- Cost of Production: an increase in the cost of production leads to a decrease in supply, ceteris paribus.
- Natural Conditions: climatic conditions directly affect the supply of certain products.
- Technology: a better and more advanced technology increases the production of a product, leading to an increase in supply.
- Factor Prices and their Availability: the availability of inputs such as raw materials, manpower, equipment, and machines affects the supply of a product.
- Transport Conditions: better transport facilities increase the supply of products.
- Prices of Related Goods: the prices of substitutes and complementary goods also affect the supply of a product.
- Government's Policies: the government's policies, such as fiscal policy and industrial policy, affect the supply of a product.
Supply Curve
- The supply curve shows the direct correlation between the quantity supplied (Q) and the price (P).
- A shift to the left of the supply curve indicates a decrease in the overall supply, while a shift to the right indicates an increase in the overall supply.
Equilibrium
- Equilibrium is the point where the quantity demanded equals the quantity supplied.
- The equilibrium price is the price at which the quantity demanded equals the quantity supplied.
- Surplus occurs when the price exceeds the equilibrium price, while shortage occurs when the price is below the equilibrium price.
Shifts in the Equilibrium
- An increase in demand, ceteris paribus, causes the equilibrium price to rise, and quantity supplied to increase.
- A decrease in demand, ceteris paribus, causes the equilibrium price to fall, and quantity supplied to decrease.
- An increase in supply, ceteris paribus, causes the equilibrium price to fall, and quantity demanded to increase.
- A decrease in supply, ceteris paribus, causes the equilibrium price to rise, and quantity demanded to decrease.
Price Elasticity of Supply
- Elastic supply (PES>1): producers can increase output without a significant rise in cost or a time delay.
- Inelastic supply (PES<1): producers cannot increase output without a significant rise in cost or a time delay.
Law of Supply
- The law of supply states that as the price of a good or service increases, the quantity of goods or services that suppliers offer will increase, and vice versa.
- The law of supply is a microeconomic law that describes the relationship between the price of a good or service and the quantity supplied.
- The law of supply is depicted by a supply curve, which is always upward sloping.
Factors Affecting Supply
- Price: a increase in price leads to an increase in supply, ceteris paribus.
- Cost of Production: an increase in the cost of production leads to a decrease in supply, ceteris paribus.
- Natural Conditions: climatic conditions directly affect the supply of certain products.
- Technology: a better and more advanced technology increases the production of a product, leading to an increase in supply.
- Factor Prices and their Availability: the availability of inputs such as raw materials, manpower, equipment, and machines affects the supply of a product.
- Transport Conditions: better transport facilities increase the supply of products.
- Prices of Related Goods: the prices of substitutes and complementary goods also affect the supply of a product.
- Government's Policies: the government's policies, such as fiscal policy and industrial policy, affect the supply of a product.
Supply Curve
- The supply curve shows the direct correlation between the quantity supplied (Q) and the price (P).
- A shift to the left of the supply curve indicates a decrease in the overall supply, while a shift to the right indicates an increase in the overall supply.
Equilibrium
- Equilibrium is the point where the quantity demanded equals the quantity supplied.
- The equilibrium price is the price at which the quantity demanded equals the quantity supplied.
- Surplus occurs when the price exceeds the equilibrium price, while shortage occurs when the price is below the equilibrium price.
Shifts in the Equilibrium
- An increase in demand, ceteris paribus, causes the equilibrium price to rise, and quantity supplied to increase.
- A decrease in demand, ceteris paribus, causes the equilibrium price to fall, and quantity supplied to decrease.
- An increase in supply, ceteris paribus, causes the equilibrium price to fall, and quantity demanded to increase.
- A decrease in supply, ceteris paribus, causes the equilibrium price to rise, and quantity demanded to decrease.
Price Elasticity of Supply
- Elastic supply (PES>1): producers can increase output without a significant rise in cost or a time delay.
- Inelastic supply (PES<1): producers cannot increase output without a significant rise in cost or a time delay.
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Description
This quiz covers the concept of law of supply, its relation to the theory of production and costs, and how it affects the overall supply curve.
