Why do higher input costs cause firms to supply less at every price point?

Higher input costs reduce profit margins at each price level, making production less profitable, so firms are willing to supply smaller quantities at any given price.

What happens to the supply curve when production costs increase?

The supply curve shifts to the left.

Explain how an increase in raw material prices affects the quantity firms are willing to supply.

Firms supply less at every price point because their profit margins are squeezed by the higher costs.

How do lower input costs affect profit margins at each price level?

Lower input costs increase profit margins at each price level, making production more profitable.

What happens to the quantity firms are willing to supply when production costs fall?

Firms supply more at every price point.

In which direction does the supply curve shift when costs of production decrease?

The supply curve shifts to the right.

Edexcel A-Level Business 9BS0

Meeting Customer Needs

Topic overview The market Market research Market positioning

The Market

Topic overview Demand Supply Markets Price elasticity of demand Income elasticity of demand

Marketing Mix and Strategy

Topic overview Product/service design Branding and promotion Pricing strategies Distribution Marketing strategy

Managing People

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Entrepreneurs and Leaders

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Topic overview Internal finance External finance Liability Planning

Financial Planning

Topic overview Sales forecasting Sales, revenue and costs Break-even Budgets

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Topic overview Profit Liquidity Business failure

Resource Management

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Topic overview Economic influences Legislation The competitive environment

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Topic overview Corporate objectives Theories of corporate strategy SWOT analysis Impact of external influences

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Decision-Making Techniques

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Globalisation

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Global Marketing

Topic overview Marketing Niche markets Cultural/social factors

Global Industries and Companies

Topic overview The impact of MNCs Ethics Controlling MNCs

The Market

Supply

4 things to know
Paper 1 and Paper 3

Overview

How production costs, technology, indirect taxes and subsidies shift the supply curve, the external shocks that reduce or increase supply, and the difference between a change in supply and a movement along the curve.

What you need to know

Answer each one before you reveal it.

Your recallNot started

Process

How do production costs affect supply?

Process

How do indirect taxes and falling costs affect supply?

Key term

What are external shocks and how do they affect supply?

Key term

How can positive external shocks affect supply?

Questions from this subtopic

Each one with the model answer underneath.

1
Why do higher input costs cause firms to supply less at every price point?
Model answer
Higher input costs reduce profit margins at each price level, making production less profitable, so firms are willing to supply smaller quantities at any given price.
2
What happens to the supply curve when production costs increase?
Model answer
The supply curve shifts to the left.
3
Explain how an increase in raw material prices affects the quantity firms are willing to supply.
Model answer
Firms supply less at every price point because their profit margins are squeezed by the higher costs.
4
How do lower input costs affect profit margins at each price level?
Model answer
Lower input costs increase profit margins at each price level, making production more profitable.
5
What happens to the quantity firms are willing to supply when production costs fall?
Model answer
Firms supply more at every price point.
6
In which direction does the supply curve shift when costs of production decrease?
Model answer
The supply curve shifts to the right.

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