Question 1

What is the definition of supply in microeconomics?

Accepted Answer

In microeconomics, supply refers to the total amount of a specific good or service that is available to consumers. It is typically represented as a supply curve on a graph, showing the relationship between price and quantity supplied. The law of supply states that, all else being equal, an increase in price results in an increase in quantity supplied.

Question 2

How does the law of supply affect market equilibrium?

Accepted Answer

The law of supply, which states that higher prices lead to higher quantities supplied, plays a crucial role in determining market equilibrium. Market equilibrium occurs where the supply and demand curves intersect, indicating the price at which the quantity supplied equals the quantity demanded. Changes in supply, such as shifts due to technological advancements or input costs, can affect this equilibrium, leading to changes in market prices and quantities.

Question 3

What factors can cause a shift in the supply curve?

Accepted Answer

Several factors can cause the supply curve to shift, including changes in production costs, technological advancements, taxes and subsidies, prices of related goods, and expectations of future prices. For instance, a decrease in production costs or an improvement in technology can shift the supply curve to the right, indicating an increase in supply at every price level.

Question 4

How do taxes and subsidies impact supply?

Accepted Answer

Taxes and subsidies have significant impacts on supply. A tax on a good increases production costs, leading to a decrease in supply, which shifts the supply curve to the left. Conversely, a subsidy reduces production costs, increasing supply and shifting the supply curve to the right. These shifts affect the market equilibrium, influencing prices and quantities.

Question 5

What is the difference between a movement along the supply curve and a shift of the supply curve?

Accepted Answer

A movement along the supply curve occurs when there is a change in the quantity supplied due to a change in the good's price, holding other factors constant. This is depicted as a movement along the existing supply curve. In contrast, a shift of the supply curve happens when a non-price factor, such as technology or input costs, changes, resulting in a new supply curve. This indicates a change in supply at every price level.

Supply

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