Economics- Chapter 5

Long Run

A period of production long enough for producers to adjust the quantities of all their resources

Short Run

A period of production that allows producers to only change a variable input (labor)

Law of Supply

A principle that states suppliers will normally offer more for sale at higher prices and less at lower prices

Subsidy

Government payment to encourage or protect an economic activity

Supply Curve

Graph showing the various quantities supplied at each and every price

Diminishing Returns

In production, this principle is where the output increases at a declining rate as more units of a variable input are added

Quantity Supplied

Amount of a product that producers bring to the market at any given price

Supply

Amount of a product that would be offered for sale at all possible prices

Total Product

Another term for total output produced by a firm

Supply is defined as the amount of a product that would be offered for sale

Define supply

The Law of Supply is the principle that suppliers will normally offer more for sale at high prices and less at lower prices

Explain the Law of Supply

An individual supply curve is a graph showing the various quantities supplied at each and every price by one firm A market supply curve is the supply curve that shows the quantities offered at carious prices by all firms

Explain the difference between the individual supply curve and the market supply curve

Total cost of production is the sum of the fixed and variable costs Marginal cost is the extra cost incurred when a business produces one additional unit of a product

Explain the difference between total cost and marginal cost

Total Revenue

It is the number of units sold multiplied by the average price per unit

Cost of Inputs Productivity Technology Taxes and Subsidies Expectations Government Regulations Number of Sellers

List the 7 factors that cause a change in supply

Raw Materials

Refers to unprocessed natural products used in production

Marginal Cost

The extra cost incurred when a business produces one additional unit of a product

Marginal Product

The extra output or change in total output caused by the addition of one more unit of variable input

Total Cost

The sum of fixed costs and variable costs

Break-Even Point

The term used to describe the point at which the total output or total product a business needs to sell in order to cover its total cost

Change in Quantity Supplied

This occurs when there is a change in the amount offered for sale in response to change in price

Fixed Cost

Type of cost that a business incurs even if the plant is idle and output is zero

Variable Cost

Type of cost that changes when the business rate of operation or output changes

Market

Type of supply curve that shows various quantities supplied at each and every price by all firms

Individual

Type of supply curve that shows various quantities supplied at each and every price by one firm