Examkin

Question

Difficulty: EasyDeterminants and Changes in Supply

Match each economic scenario on the left with its correct effect on the supply curve of a commodity on the right.

  • An increase in the commodity's market priceAn increase in quantity supplied shown by upward movement along the supply curve
  • A reduction in the prices of raw materials used in productionAn increase in supply shown by a rightward shift of the supply curve
  • An outbreak of crop disease destroying agricultural farmsA decrease in supply shown by a leftward shift of the supply curve
  • A decrease in the commodity's market priceA decrease in quantity supplied shown by downward movement along the supply curve

Answer

An increase in the commodity's market price matches an increase in quantity supplied (upward movement along the curve). A reduction in raw material prices matches an increase in supply (rightward shift). An outbreak of crop disease matches a decrease in supply (leftward shift). A decrease in price matches a decrease in quantity supplied (downward movement along the curve).
Changes in a commodity's own price result in movements along the supply curve (changes in quantity supplied), with price increases causing upward movement and price decreases causing downward movement. Conversely, changes in non-price determinants such as input costs or natural factors cause shifts of the entire supply curve (changes in supply), where favorable conditions shift the curve rightward and adverse conditions shift it leftward.

Step-by-Step Solution

1
Distinguish between price of the good itself and non-price determinants of supply.
Price changes cause movement along the curve, while non-price determinants cause the entire supply curve to shift.
This is fundamental to supply theory in economics.
2
Analyze price changes (price increases and decreases).
An increase in price leads to upward movement along the curve; a decrease leads to downward movement.
Producers supply more at higher prices and less at lower prices, holding other factors constant.
3
Analyze non-price determinants (input costs and natural factors).
Cheaper raw materials shift the curve rightward (increased supply). Crop diseases shift the curve leftward (decreased supply).
Non-price factors alter the willingness and ability of producers to supply at every given price point.

Key Concept

Change in Quantity Supplied vs. Change in Supply
Rate this question

Topics

Determinants and Changes in Supply

More questions from this topic