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https://www.youtube.com/watch?v=0yWsOZgsTSY https://www.youtube.com/watch?v=0yWsOZgsTSY After 2 mins 2.2 The Role of Supply
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Supply The relationship between the various possible prices of a product and the quantities of the product that businesses are willing to supply The Law of Supply There is a direct relationship between a product’s quantity supplied and its price Higher prices for a commodity will make businesses want to increase the quantity to result in higher revenue The Role of Supply
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Supply Schedule A table that shows possible combinations of prices and quantities supplied of a product Supply Curve A graph that expresses possible combinations of prices and quantities supplied of a product The Supply Curve
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Factors that cause changes in quantity supplied are called Supply Factors The 6 main supply factors are: The number of producers Resource prices State of technology Changes in nature The prices of related products Producer expectations Again, note that while considering each factor, you must assume that all other factors remain constant. Changes in Supply
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Number of Producers Increase in the number of businesses in an industry causes an increase in supply Higher quantity supplied at each price supply curve shifts to the right Similarly, a decrease in supply would shift the supply curve to the left Supply Factors
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The supply schedule shows that when the price of this item falls, quantity supplied also falls, as the company finds it profitable to produce fewer units Positively sloped supply curve indicates a direct relationship between price and quantity supplied The Market Supply Schedule and Curve
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When the number of houses increase in an area, the number of houses increases at every possible price, shifting the supply curve to the right from S to S1 A decrease in the number of houses decreases the quantity of houses supplied at every price, shifting the supply curve left from S to S2. Changes in Supply
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Resource Prices If the price of a resource used to make a good increases, fewer units of that product can be produced for the same expenditure Businesses cut back on production, and supply curve shifts to the left State of Technology Newer technology means more efficient production methods – thus, more units can be produced at every price, so supply curve will shift to the right e.g. using a better grain fertilizer will cause the supply of barley to increase Supply Factors Cont’d
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Changes in Nature Early frost, record high temperatures, flood, earthquake, etc. can affect supply of many products especially agricultural Prices of Related Products A product’s supply can be influenced by changes in prices of other products Producer Expectations If producers expect the price of the item they sell to change in the near future, this affects the product’s current supply e.g. if barley farmers expect barley prices soon to fall, they will provide as much of the product as possible now Supply Factors Cont’d
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E-commerce is making some markets more competitive Consumers are able to shop competitively on their computers and phones Consumers are now accessing businesses globally rather than just locally Reflect
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Change in quantity supplied: moving up/down the dark red curve Change in supply: moving from the left, dark red curve to the right pink curve Change in Quantity Supplied versus Change in Supply
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