Unit 2.2 - Supply
What you need to know and understand:
Key concepts:
Concepts to understand:
- The law of supply—relationship between price and quantity supplied
- Assumptions underlying the law of supply [HL only]
- The law of diminishing marginal returns
- Increasing marginal costs
- Assumptions underlying the law of supply [HL only]
- Supply curve
- Relationship between an individual producer’s supply and market supply
- Non-price determinants of supply
- Changes in costs of factors of production (FOPs)
- Prices of related goods (in the cases of joint and competitive supply)
- Indirect taxes and subsidies
- Future price expectations
- Changes in technology
- Number of firms
- Movements along and shifts of the supply curve
Key concepts:
- Scarcity
- Choice
- Efficiency
- Equity
- Economic well-being
- Sustainability
- Change
- Interdependence
- Intervention
Concepts to understand:
- Interaction between consumers and producers in a market is the main mechanism through which resources are directed to meet the needs and wants in an economy..
- Consumer and producer choices are the outcome of complex decision-making.
- Welfare is maximized if allocative efficiency is achieved.
- Constant change produces dynamic markets.
TEXTBOOK unit 2.2
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