Economics: Supply Curve and Determinants

The Supply Curve

• Law of Supply: Positive relationship; as price increases, quantity supplied increases.

• Increasing Marginal Costs explain upward slope of supply curve.

• Types of Supply Changes:

  • Change in Supply: Shift of the supply curve.

  • Change in Quantity Supplied: Movement along the supply curve.

Determinants of Supply

• Influencing factors include:

  • Taxes on production.

  • Resource Costs: Higher costs reduce supply.

  • Technology: Better tech can increase supply.

  • Expectations: Future price expectations affect current supply.

  • Number of Sellers: More sellers increase market supply.

True Statements about Supply

• True statement: D) As price increases, producers supply more.

• Incorrect Statements:

  • A) Inverse relationship (True for demand).

  • B) Supply refers to offerings, not just inventory.

  • C) Price decrease leads to less supplied.

Quantity Supplied vs. Supply Changes

• Increase in Quantity Supplied: Movement up along the curve.

• Increase in Supply: Rightward shift of the supply curve.

• Decrease in Supply: Leftward shift of the supply curve.

Impacts of Price Changes

• If price decreases, expect:

  • D) Quantity supplied to decrease.

• Increase from $2 to $4 in hamburger price implies:

  • A) Increase in quantity supplied.

Government Intervention

• Tax on production results in:

  • C) Leftward shift in supply.

Production Efficiency

• Lower production costs imply:

  • A) Rightward shift of the supply curve.

Market Expectations

• If farmers withhold corn supply, it:

  • C) Causes a leftward shift of current supply.

Overall Supply Curve Movements

• An increase in production costs results in:

  • A) Leftward shift of the supply curve.

• Emergence of new firms can indicate an:

  • A) Increase in supply of product (e.g. frozen yogurt).

• Shift from S1 to S2 due to efficient production tech: D) More effective insecticides.