2.3

• Supply is the quantity of goods and services that producers are willing and able to supply.
• The law of supply ➔ as the price of a good increases producers supply more because they get extra revenue from goods as the selling price is high
• Supply curve shows the relationship between price and how much a firm is willing and able to sell.
• Sunk cost The cost of an investment and you dont get the money back
• Diminishing of return is when one factor of production is being constrained.
• Contraction of supply is when a decrease in price causes a decrease in quantity supplied
• Expansion of supply is when a rise in price causes an increase in quantity supplied
• A shift in the supply curve is when there is an increase in supply at the same price
• Factors causing a shift in the supply curve:

  P - Productivity

  I - Indirect Tax

  N - Number of firms

  T - Technology

  S - Subsidies

  W - Weather

  C - Cost of production
• Indirect tax is a tax on goods and services. VAT is a type of indirect tax
• Subsidies are grants given from the government to firms
• Elastic supply is when a change in price leads to a larger change in quantity supplied
• PES measures the responsiveness of quantity supplied to a change in price
• Inelastic supply is when there is a big change in price cause small change in quantity supplied