Year 11 Economics, Holiday homework

Unit 7.1 – Factors Affecting Market Supply
The main factors affecting market supply include:
The price of the good or service itself
The market price of the good or service will influence the producer’s ability and willingness to supply it. E.g., if the price is too low, some producers wouldn’t be able to cover their costs of production and would not supply the item.
The expectations of suppliers about the future price of a good or service also influences the level of supply. If supplier believes the price will rise in the future, perhaps due to increase in demand resulting from change in consumer tastes, supply of good or service will increase. This is due to the possibility of increasing profits arising from supply of good. The reverse is true if future prices are expected to fall.
The price of other goods and services
The quantity of a good or service supplied at any time will be affected by the prices of other goods and services. E.g., if the price of good X remained the same, while the price of Y increased, it would become more profitable to produce good Y. Therefore firms may be less willing to supply good X and more willing to start producing and supplying good Y.
The state of Technology
Improvements in technology lower production costs and allow more firms to supply more goods at a given price. They also allow adjustments of production runs to quickly accommodate changing demand patterns. E.g., the use of automated production-line techniques in the motor vehicle has greatly reduced production costs, and enabled producers to increase supply.
Changes in the cost of factors of production
The costs of factors of production are among the most important influences on the ability of firms to supply products in the market place. Any fall in the cost of factors of production allow firms to supply more of a particular