Chap 4

• What is the main focus of Chapter 3 in A'Level Economics?

  Supply
• What should you include when drawing a demand curve diagram?

  Label the axes and the curve
• What causes a movement along the demand curve?

  A change in the price of the good
• What two words describe movements along the demand curve?

  Extension and contraction
• What does a shift in the demand curve represent?

  A change in demand at every price level
• What are possible reasons for a shift in the demand curve?

  Changes in consumer income, preferences, or prices of related goods
• What is the relationship between price and quantity supplied?

  • As price increases, quantity supplied increases
  • This reflects the Law of Supply
• What is the definition of supply?

  The quantity of goods/services that producers are willing and able to supply at a given price
• What does the supply curve represent?

  A graph showing quantity supplied at any given price
• What is individual supply?

  The supply of a product by one producer
• What is market supply?

  The supply of a product by all producers in a market
• What is joint supply?

  When a firm produces more than one product together
• What is competitive supply?

  A firm can use its resources to produce more than one product
• What causes movements along the supply curve?

  Changes in the price of the product
• What causes shifts of the supply curve?

  Changes to the costs of production, technology, productivity, or weather
• What is producer surplus?

  The difference between the price received and the price producers would have been willing to accept
• How does a price change affect producer surplus?

  A price increase generally increases producer surplus
• What is the Law of Supply?

  There is a positive relationship between the quantity supplied and the price of a good/service
• What is the Law of Demand?

  The higher the price, the less consumers will demand
• What motivates consumers in the market?

  Consumers are motivated to maximize their utility
• What motivates firms in the market?

  Firms are motivated to maximize their profits
• What is competitive supply with an example?

  When a firm could supply alternative products using its resources, e.g., a farm growing wheat or maize
• What is joint supply with an example?

  When an increase in one good leads to an increase in supply of a by-product, e.g., beef production increasing leather supply
• What is composite supply with an example?

  When a firm's products could be supplied into more than one market, e.g., apples for fresh consumption or cider
• How does an increase in minimum wage affect supply?

  It may decrease supply due to higher costs for firms
• How does investing in a tractor affect supply?

  It may increase supply due to improved efficiency
• How does new legislation requiring health and safety qualifications affect supply?

  It may decrease supply due to increased costs
• How does a government tax on a product affect supply?

  It may decrease supply due to lower profits
• How does a government subsidy affect supply?

  It may increase supply due to higher profits
• How does an expectation of increased demand affect supply?

  It may increase supply now in anticipation of higher future profits
• What is the relationship between price and quantity supplied according to the supply curve?

  Price and quantity supplied are directly proportional
• What does a shift to the left in the supply curve indicate?

  A decrease in supply at every price
• What does a shift to the right in the supply curve indicate?

  An increase in supply at every price
• Why does the supply curve slope upwards?

  Because higher prices provide more profit incentive for businesses to increase output
• What is the formula for calculating profit?

  Profit = Total Revenue (TR) - Total Costs (TC)
• What is the formula for Total Revenue (TR)?

  TR = price x quantity
• What is the formula for Total Costs (TC)?

  TC = Fixed costs + Total variable costs
• What is the formula for Average Total Costs?

  Average Total Costs = TC / quantity
• What is the formula for Marginal Costs?

  Marginal Costs = Change in Total Costs as a result of producing one more unit of output
• What happens to the supply curve when any factor other than price changes?

  The supply curve shifts