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)