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90197 Describe the concept of supply

90197 Describe the concept of supply. 90197 Supply. Q ONE. (a) Define the law of supply. As the price of a good or service increases the quantity supplied increases. (Ceteris paribus). (b) Explain the difference between a change in supply and a change in quantity supplied.

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90197 Describe the concept of supply

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  1. 90197 Describe the concept of supply

  2. 90197 Supply Q ONE (a) Define the law of supply. As the price of a good or service increases the quantity supplied increases. (Ceteris paribus) (b) Explain the difference between a change in supply and a change in quantity supplied. A change in supply occurs when the factors which influence supply change i.e. cost of production, technology improvement, or a change in the price of an alternative good. This results in a shift of the supply curve. A change in quantity supplied occurs when the price of the good changes. This results in a movement along the supply curve.

  3. 90197 Supply Q ONE (c) Use the information above to complete the supply schedule below

  4. 90197 Supply Price $ 600 500 400 300 200 100 S 5 10 15 20 25 30 35 Quantity Q ONE (d) Draw a fully labeled supply curve for Speedy Spokes on the grid below.

  5. 90197 Supply Price $ 600 500 400 300 200 100 S 5 10 15 20 25 30 35 Quantity Q ONE (e) (i) Show the effects of an increase in the price of bicycles from $300 to $400 on Graph 1. Use dotted lines, labels and arrows.

  6. 90197 Supply Q ONE (ii) Explain the effect of the increase in price from $300 to $400. Achievement: Quantity supplied will increase. Merit: As the price increases from $300 to $400 quantity supplied increases from 15 to 20 bicycles. At the higher price Speedy Spokes makes relatively more profit so is therefore willing to supply more.

  7. 90197 Supply P P S’ S Q’ Q Q Q TWO (a) On the graph below show and fully label the effect on supply of the increase in wages of the workers at Speedy Spokes. (b) Fully explain the effect on the supply of bicycles of the increase in the cost of wages. Achievement: Supply will decrease Merit: Because the cost of production has increased due to the increase in wages, Excellence less is supplied at each price level; because it is now relatively less profitable.

  8. 90197 Supply Q THREE (a) Describe how the Government can encourage the purchase and use of bicycles. The government will subsidise bicycles. (b) Explain the effect of the government intervention on the supply of bicycles and the consequences for Speedy Spokes. Merit :The government subsidy on bicycles is paid to the producer to help them reduce the costs of production. It will result in the supply curve shifting to the right because the subsidy will reduce the cost of the bicycle to Speedy Spokes. The reduced cost can be passed on to the consumer which will reduce the price and encourage consumers to purchase a bicycle. Excellence: The consequence to Speedy Spokes is thattheymay have to employ and train more staff. Speedy Spokes may need to enlarge their store.

  9. 90197 Describe the concept of supply

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