Supply: Practice Questions

Which statement provides the best definition of the supply of a product?

Which of the following will result in a contraction along the supply curve for cotton?

A manufacturer of electric bicycles receives a government subsidy for every unit produced. Simultaneously, the market price of electric bicycles increases due to a sudden rise in demand.
How would these two events be represented on a supply curve diagram for electric bicycles?

A government decides to withdraw a subsidy that was previously granted to the producers of a good.
What is the most likely effect on the supply curve for that good?

The market supply for a specific agricultural crop decreases significantly even though the market price remains unchanged.
What is the most likely cause of this change?

Explain how an increase in the number of firms in an industry affects the market supply of a product.

Analyze the impact on the market supply of a commodity if producers expect the future price of the good to rise significantly, while they simultaneously benefit from a decrease in the cost of raw materials. Identify the specific condition required for the current supply curve to shift to the right.

In a market where sheep are raised for both wool and meat (joint supply), analyze the impact on the supply curve \( S_1 \) for wool if the market price of lamb meat falls significantly. Assuming all other factors remain constant, describe the shift in the wool supply curve and identify three factors that would simultaneously make the supply of wool more price inelastic (\( PES < 1 \)).

A firm's decision to supply a product is influenced by the price of that product and various other factors in the production process.

(a) Define supply. [1]

(b) Identify two non-price factors that could cause an increase in supply (a shift of the supply curve to the right). [2]

(c) State the term used to describe a movement along a supply curve caused by a decrease in price. [1]

(a) Define market supply.

(b) Explain, using a supply diagram, how the imposition of an indirect tax on a product affects its market supply and the resulting equilibrium price.

(c) Analyse how two factors, other than price, could lead to a decrease (shift to the left) in the supply of a manufactured good, such as automobiles.