Supply Theory (Quizlet Revision Activity)

Here are ten terms to revise all linked to the basic theory of supply.

Key terms on the theory of supply to revise:

• Indirect taxes: A tax on suppliers causes inward shift of supply e.g. the sugar tax
• Competitive supply: Alternative products a firm could make with its resources. E.g. a farmer can plant potatoes or carrots depending on the price
• Bottleneck: Any factor that causes production (supply) to be delayed or stopped
• Subsidies: Government financial support to producers (e.g.farmers) that causes an outward shift of supply
• Profit motive: Higher prices increase the potential for making higher returns for shareholders
• Law of supply: Positive relationship between market price and quantity supplied
• Elasticity of supply: Responsiveness of supply to a change in market price
• Market supply: Total supply brought to the market by all of the producers at each price
• Joint supply: When increase/decrease in supply of one good leads to an increase/decrease in supply of a by-product
• Excess supply: When there are unsold goods in the market