Economics - supply 2.2

determinants of supply

-costs of inputs (higher costs, less supply) -productivity (increased, increase supply) -technology (more technology, increase supply) -taxes on business (higher taxes, decreased supply) and subsidies (increased subsidies, increase supply) -government regulations (more, decrease) -expectations from sellers of rising costs or higher prices -number of sellers in the market

law of supply

-more goods and services supplied at higher prices than at lower prices -the price of a product is directly related to the quantity supplied, other things constant

change in quantity supplied

-movement along a supply curve -can only be caused by a change in the price of the good -increase in Qs is movement to the right along a supply curve -decrease in Qs is movement to the left along a supply curve

all of the following are likely to change the market supply curve

-the cost of labor -the expectation that prices are about to increase -the numbers of sellers offering the product

marginal costs

-what supply is determined by -cost of making additional products

costs producers face

1 rent 2 utilities 3 insurance 4 labor 5 marketing 6 materials

if an industry is highly profitable, new firms are likely to enter the market. this would be reflected in a shift of the

supply curve to the right

the supply of a product normally decreases if

taxes on the production of the product increase

supply

the amount of goods and services that businesses are willing and able to produce at different prices during a certain period of time

change in supply

*price does not change supply!!* determinants of supply

supply curve

a diagram showing the relationship between the price of a good and the quantity supplied per period of time

what is most likely to happen if there is an increase in the costs of production

decrease in supply

law of diminishing productivity

marginal costs of making additional goods always rise eventually -individual costs of more and more items go up with each additional item

higher prices allow businesses to increase production. this occurs because

marginal production costs usually rise when businesses increase their rates of production

soybeans are an important ingredient in making tofu. so, if the prices of soybeans suddenly increased

the supply curve of tofu would shift to the left