Supply

• Supply

  How willing and able producers are to supply to a market at a given price and time
• Effect on supply if price increases

  If price increases, Quantity supplied increases as there is a greater profit motive by producers
• Effect on supply if price decreases

  If price Decreases, Quantity supplied decreases as there is a lack of a profit motive
• Conditions of supply

  factors that affect how much producers supply
• Price elasticity of supply

  Measures the responsivness of quantity supplied given a change in price
• PES formula

  %change in QS / % change in price
• Interpreting PES

  PES is always a positive value as if price increases, QS increases due to the profit motive. If price decreases, QS decreases as producers aren't as willing to supply
• Acronym for factors influencing PES


  T time period

  E State of the economy

  A Availiablity of factors of production

  S Stockpiles and perishability

  S Spare capacity
• Time period's influence on PES

  The greater the time period, the more time producers have to increase supply
• Short run

  When at least one Factor of production remains constant
• Long run

  When all factors of production can change
• State of the economy's influence on PES

  If the economy is in a bad state there will be more factors of prodcution available to utilise. Where as if the economy is in a good state, There will be less available recources in order to change supply
• Availablity of factors of production influence on PES

  If there is greater availability of factors of production, supply would be more elastic as producers can produce more in a short time
• Stockpiles and perishability influence on PES

  If an item is non-perishable, they can be stockpiled for longer periods of time and supply can be increased when needed
• Spare capacity's influence on PES

  If there is spare capacity within a firm e.g machines not in use, supply will be elastic as production can increase in a short time