IB Economics 2.2 Supply Key Definitions

Goods or services in Competitive Supply are alternate use of resources of each other where they compete for the use of the same resources.

All resources or inputs used to produce goods and services.

Taxes levied on spending on goods and services. They are called indirect because while consumers contribute to part or all of the tax, it is the suppliers (firms) who collect and transfer these taxes to the government authorities (consumers pay the taxes indirectly).

Goods or Services in Joint Supply are consequences of each other and derived from a single process or product.

As additional units of a variable input (e.g., labour) are added to fixed inputs (e.g., land), the marginal product increases by less and less each time, eventually decreasing.

There is a direct, positive relationship between price and quantity supplied.

The cost of producing an additional unit of output

The additional output that results from adding one extra unit of a variable input (e.g., labour).

The sum of the supplies of all individual firms within a market for the good.

Factors, other than price, that can affect the supply of a firm (or multiple firms) and shift (change position) the supply curve.

Monetary help (direct or indirect payment) offered by the government to firms (sometimes households) to aid in lowering costs of production.

The quantity of a good or service a firm (or multiple firms) is willing and able to produce for a given price in a given time period, ceteris paribus.

Mandatory payments made by households and firms, collected by governments.