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Economics 1.2.4
Economics- Edexcel 1.2.4
| Term | Definition |
|---|---|
| supply | the quantity of a good or service that producers are willing and able to supply at a given price in each period |
| law of supply | as price rises, businesses expand supply because higher prices provide a profit incentive for firms to expand production |
| supply curve | shows a relationship between market price and how much a firm is willing and able to sell |
| market supply | total supply brought to market by all producers at each price |
| market supply equation | sum of individual supply schedules |
| expansion / extension of supply | movement outwards along the supply curve |
| contraction | movement inwards along the supply curve |
| profit incentive | the motivation to earn a return on your investment or work greater than you put in |
| why are supply curves drawn sloping upwards | profit motive, production and costs and new entrants into the market |
| profit motive and supply | when demand increases causing the market price to rise, it becomes more profitable for businesses to increase their output |
| production and costs and supply | when output expands so does production costs, meaning higher prices are needed to cover these extra costs- can be due to diminishing returns |
| new entrants into the market and supply | higher prices create incentives for other businesses to enter the market creating an expansion of supply, however if the businesses enter for non-price related reasons the supply will shift |
| shifts in supply | caused by changes in the conditions of supply |
| inward shifts | less is supplied at each price |
| outwards shifts | more is supplied at each price |
| exchange rate | the rate at which one currency can be exchanged for another |
| supply chain | the network of all the individuals, organizations, resources, activities and technology involved in the creation and sale of a product |
| commodities | a basic good used in commerce that is interchangeable with other goods of the same type |
| substitute in production | a product that could have been supplied using the same resources |
| supply shocks | occur when an outside event has an impact on the ability of producers to supply goos and services to a market |
| competitive supply | alternative products that a business could make with it’s factor resources of land, labour and capital |
| joint supply | an increase or decrease in the supply of one good leads to an increase or decrease in supply of a by-product |
| bottleneck | any factor that causes production to be delayed or stopped |
| elasticity of supply | responsiveness of supply to a change in market price |
| excess supply | supply is greater than demand and there are unsold goods in the market, surpluses put downward pressure on the market price |
| indirect taxes | tax on suppliers causing an inward shift of supply |
| spare capacity | measures the extent to which a producer, industry or an economy is operating below the maximum sustainable level of production |
| stocks | inventories, unsold finished or semi-finished products |
| subsidises | government financial support to producers causing an outward shift of supply |
Created by:
jessharris
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