Foundations of Economic Analysis: Supply Flashcards Preview

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Flashcards in Foundations of Economic Analysis: Supply Deck (5)
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1

What is the diminishing marginal product?

If increasing quantities of labour are applied ceteris paribus to producing a good then the additional amount produced by each additional labourer (called the marginal product) will eventually decrease.

2

What is supply related to?

The current price of the product
The prices and quantities of factors of production
The current state of technology.

3

Using a ceteris paribus assumption what is the formula that we use to concentrate on current price?

Qs = g (P)

4

If output increases, what should we therefore expect?

As output increases, with given technology and prices of inputs, then we can expect costs to rise for each additional unit of output.

5

If costs rise, what should we therefore expect?

As costs rise then a firm will need higher prices to make a profit on each additional unit of output.