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Supply (Factors leading to a change in supply ((changes in the costs of…
Supply
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Indirect taxes
When the government increases tax on goods such as petrol then supply will decrease
VAT / Customs tax / Excise tax are all indirect taxes and when applied to goods it makes supplying them less attractive. This can lead to a decrease in supply
Government subsidies
This is a payment from the government to encourage more suppliers to enter the market and to supply more. With a subsidy there is an increase in supply.
For example the Government pays subsidies to wind farm manufacturers to erect turbines offshore in the UK. This adds about £18 a year to a UK householder’s energy bill.
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External shocks
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For example if the cost of oil increases this increases cost of production, and may lead to job losses or cost cutting, and will result in a decrease in supply
Glossary
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Shock; an event which causes a change within an economy which occurs outside of it. Unpredictable and may affect supply.
Automation; method of operating or controlling processes by automatic means using devices. Reduces need for human interaction.
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Indirect tax; taxes levied on products or services before they reach the consumer e.g. VAT and excise
Government subsidy; a grant or gift of money from the government to encourage supply of certain goods e.g. milk subsidies
Supply is measured in terms of the quantity of a good or service that a producer is willing and able to make available on the market, at a given price, over a given period of time.