supply
Law of Supply
As price increases, quantity supplied increases, visa versa, ceteris paribus.
Reasons for the law of supply
Profit motive
Possible questions (non price factors)
Profit = Revenue - Costs
Relatively more or less profitable
Difference between revenue and costs
More able to cover the costs of production
Environmental
Increase in costs = decrease in profits
Decrease in costs = increase in profits
increase in revenue = increase in profits
decrease in revenue = decrease in profits
Related goods
Legal factors
Technology
Productivity
An example is cherry orchids. Frost at cherry orchids can damage the fruit, therefore causes a decrease in supply. The supplier can also hire helicopters but this will cause an increase in the costs of production, therefore, decreasing the difference between revenue and costs, making it relatively less profitable to supply cherries. This is shown by a shift of the supply curve to the left and a change for s to s-.
An example of related goods is roses and daisy's. As the price of roses decreases, the quantity supplied of roses decreases because they are now relatively less profitable. The supplier is then less willing and able to supply roses so they will switch to the relatively more profitable good, Daisies. this means they will supply less Roses and more Daisies.
An example of a legal factor is a law on shop opening hours. If the government puts a law on shop opening hours, this will decrease the profits of the store because they are unable to open their shop for the required amount of time, therefore decreasing the number of customers which means less stock will be sold. Reducing the profits made by the store.
An Example of a technology factor is the introduction of new machines. By introducing new machines, it can decrease the production time and, although it will cost extra to install, it will increase the quantity of the good the supplier can supply and decreases the production time. This means that the supplier will then increase supply because they can produce more in the same time and, by increasing the supply of the good, they can have increased profits in the long run.
An example of productivity is sound restrictions lifted on a company. If a company had a sound restriction removed, the workers can work on the louder, more important machines, for longer which will decrease the production time of the good which will influence the supply of the good. This means that the company can maximise profits and have decreased costs of production.
Ceteris Paribus is when everything remains constant except for price.
As price increases, the good becomes relativity more profitable and the supplier is more able to cover the costs of production, visa versa, cereris paribus
Non Price factors
Restrictions on trade
Other related goods price
Technology / Productivity
Legal factors
Environmental Factors
Costs of production
Political factors
Cultural factors
Movement of the supply curve
Shift of supply curve
Movement along the supply curve
Follows the law of supply
Ceteris Paribus is in place
Quantity Supplied
Change in price
Non price factor
Supply
Doesn't follow the law of supply
Ceteris Paribus is broken
S to S-
P to P- and Q to Q-
Productivity
Productivity is the rate of output per rate of input ( every business is looking to maximize output and minimize input ) EFFICIENCY!
Examples of
Legal Factors
Political Factors
Environmental Factors
Technology / Productivity
Restrictions on trade
Other related goods price
Costs of production
Cultural factors
Decrease
Sales tax
Increase
Increase compliance costs
Subsidy
Deduce compliance costs
Increase
Decrease
Heavy Rain
Environmental concerns ( unhelpful)
Fine weather
Environmental concerns (helpful )
Increase
Decrease
New machines that increase efficiency
New machines that cause efficiency loss
Increase
Decrease
Trade Embargoes, Tariffs, Quotas, or other restrictions are placed on a firms ability to export and import
Trade Embargoes, Tariffs, Quotas, or other restrictions are removed from firms exporting and importing
Increase
Decrease
If the price of another related good increases and becomes relatively more profitable then the original good, then supply for the original good will decrease
If the price of another related good decrease, and becomes relatively less profitable then the original good, then supply for the original good will increase
Increase
Decrease
Laws of shop opening hours, employment law, safety law, factory zoning law, etc.may increase costs of production
Removal of restrictions
( eg. The minimum goes to buy certain goods) may be relaxed or removed
Increase
Decrease
Costs of production may increase if costs of resources increase or production becomes less efficient.
Costs of production may decrease in costs of resources decrease or production becomes more efficient.
Increase
Decrease
If the number of Samoans in New Zealand decreased, less Taro will be produced.
Maori may implement a rahui ( ban) on harvesting some raw materials
If the number of Asians in New Zealand increase, more rice may be produced and charged.
possible questions
supply
LOS (movement along)
changes in supply (shift of cure due to non price factors)