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Difficulty: MediumConcept and Law of Supply

Under standard competitive economic conditions, an increase in the market price of a commodity causes an outward shift of its supply curve to the right, ceteris paribus.

Answer: Answer

Answer

The statement is False. A change in price causes a movement along the supply curve (change in quantity supplied), not a shift of the supply curve.
The correct answer is False because, according to the law of supply, a change in price leads strictly to an extension or contraction along the existing supply curve (change in quantity supplied). Non-price factors, such as weather, cost of production, or technological advancements, are required to shift the supply curve itself.

Step-by-Step Solution

1
Identify the cause stated in the proposition.
The specified factor is an increase in the price of the commodity itself.
Understanding the primary variable is necessary to categorize the resulting economic movement.
2
Distinguish between a change in quantity supplied and a change in supply.
Price changes result in movements along an established supply curve (expansion/contraction of quantity supplied). Shifts of the curve (change in supply) are caused by non-price determinants.
The law of supply establishes a direct relationship between price and quantity supplied along a given curve under ceteris paribus.
3
Evaluate the statement's claim.
The statement claims a price change causes a shift of the curve, which contradicts economic theory.
Since price changes cause movement along the curve rather than shifting it, the statement is false.

Key Concept

Distinction between a change in quantity supplied (movement along the curve) and a change in supply (shift of the curve)
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Topics

Concept and Law of Supply

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