Section A: Key terms and recall
Define the term 'market supply'. [2 marks]
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Market supply is the total quantity of a good or service that all producers in a market are willing and able to offer for sale at a given price over a particular period of time. [2 marks]
What is the difference between individual supply and market supply? [2 marks]
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Individual supply refers to the quantity of a good or service that a single producer is willing and able to offer for sale at a given price, while market supply is the total quantity from all producers in the market. [2 marks]
What does a movement along a supply curve show? [1 mark]
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A movement along a supply curve shows a change in the quantity supplied of a good or service due to a change in its price. [1 mark]
List two factors that can cause a shift of a supply curve. [2 marks]
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Two factors that can cause a shift of a supply curve are: - Changes in the cost of production - Changes in technology - Changes in the number of producers - Changes in the availability of resources [2 marks]
What is the law of supply? [1 mark]
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The law of supply states that, all else being equal, an increase in the price of a good or service will lead to an increase in the quantity supplied, and a decrease in price will lead to a decrease in quantity supplied. [1 mark]
Section B: Applying your knowledge
A farmer grows wheat and sells it in the local market. Initially, the price of wheat is £100 per tonne, and the farmer is willing to supply 50 tonnes. If the price increases to £150 per tonne, the farmer is now willing to supply 70 tonnes. What does this situation illustrate? [2 marks]
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This situation illustrates a movement up along the supply curve. As the price of wheat increases, the quantity supplied by the farmer also increases. [2 marks]
A company that produces smartphones has recently invested in new technology that allows it to produce more smartphones at a lower cost. How will this affect the supply curve for smartphones? [2 marks]
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The supply curve for smartphones will shift to the right. This is because the company can now produce more smartphones at each price level due to the lower production costs. [2 marks]
A severe drought has affected the coffee crops in a major producing country. How will this affect the supply of coffee? [2 marks]
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The supply of coffee will decrease. This is because the drought has reduced the quantity of coffee that can be produced, leading to a leftward shift of the supply curve. [2 marks]
A new law has been introduced that imposes stricter regulations on the production of toys. How will this affect the supply of toys? [2 marks]
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The supply of toys will decrease. The stricter regulations will increase the cost of production, leading to a leftward shift of the supply curve. [2 marks]
A company has discovered a new, more efficient method of producing solar panels. How will this affect the supply of solar panels? [2 marks]
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The supply of solar panels will increase. The more efficient production method will lower the cost of production, leading to a rightward shift of the supply curve. [2 marks]
Section C: Explain and analyse
Explain why the supply curve for a good might shift to the left. Use an example to illustrate your answer. [4 marks]
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The supply curve for a good might shift to the left due to factors such as an increase in the cost of production, a decrease in the number of producers, or a decrease in the availability of resources. For example, if a war breaks out in a major oil-producing country, the supply of oil will decrease. This is because the war may disrupt oil production and reduce the quantity of oil that can be supplied to the market. As a result, the supply curve for oil will shift to the left. [4 marks]
Analyse the likely effects of a decrease in the price of a key raw material on the supply of a finished product. [5 marks]
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A decrease in the price of a key raw material will likely increase the supply of the finished product. This is because the lower cost of the raw material will reduce the overall cost of production, making it more profitable for producers to supply more of the finished product. As a result, the supply curve for the finished product will shift to the right. For example, if the price of cotton decreases, the supply of clothing made from cotton will likely increase. This is because clothing manufacturers will be able to produce more clothing at a lower cost, leading to an increase in supply. [5 marks]
Section D: Challenge
Discuss the factors that might cause a supply curve to shift to the right. Consider both short-term and long-term factors. [6 marks]
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Factors that might cause a supply curve to shift to the right include: - Short-term factors: - An increase in the price of the good or service - A decrease in the cost of production - An improvement in technology - An increase in the number of producers - Long-term factors: - An increase in investment in the industry - An increase in the availability of resources - An increase in government support or subsidies - An increase in demand for the good or service, leading to economies of scale For example, in the short term, a decrease in the cost of steel may lead to an increase in the supply of cars. In the long term, an increase in investment in the car industry, such as the development of new factories or research and development, may also lead to an increase in the supply of cars. [6 marks]