Question

A rise in the price of corn will cause a    ( shift out / shift in) move-along upwards    move-along downwards   in the Supply Curve for corn.

b. A decrease in the price of seed (an input to corn) will cause a    ( shift out / shift in)   move-along downwards    move-along upwards   in the Supply Curve for corn.

c. A decrease in the local number of grocery stores will cause a  ( shift out / shift in)   move-along downwards    move-along upwards   in the Supply Curve for corn.

Answer 1

Answer

A. Rise in the price of corn will cause a move-along upwards in the supply curve of corns.

B. A decrease in the price of seed will cause a shift out in the supply curve for corn.

C. A decrease in the local number of grocery stores will cause a shift in in the supply curve for corn.

The supply of a commodity depends on the price of the commodity, and some other factors, like the prices of the inputs of the production of the commodity, government subsidies and taxes, future expectation of price,technology of production, time, etc. The quantity supply of a commodity is directly related with the price of the commodity, i.e., the quantity supply of the commodity rises with the rise in price, and the quantity supply of the commodity decreases with the decrease in price, Thus if we measure the price of the commodity on the vertical axis, and the quantity supply of the commodity on the horizontal axis, then we get a positively sloped supply curve. Any change in the price of the commodity causes a movement of the price-quantity point of the commodity along the supply curve of the commodity.

If the supply of the commodity changes for the change in other factors, like, the prices of the inputs of the production of the commodity, government subsidies and taxes, future expectation of price,technology of production, time, etc., then at the same price level, the supply curve shifts either outward or inward of the original supply curve of the commodity. For the rise in supply, the supply curve shifts outward, and for the decrease in supply, the supply curve shifts inward.

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If the price of the corn rises, the supplier of corn will supply more of corns, as it will give him more revenue and thus profit. So the supply of corn will rise and thus it will cause a move-along upwards in the supply curve of corns.

In the above figure, the quantity supply of corn is measured on the horizontal axis, and the price of the corn is measured on the vertical axis.'SS' is the supply curve of corn. The original price and quantity supply of corn were P₁, and Q₁ respectively. It is shown by point 'M' on the supply curve. Now as the price of the corn rises to P₂, the quantity supply of corn rises to Q₂. The price-quantity point shifts to point 'N' on the supply curve. Thus, a rise in the price of corn will cause a move-along upwards in the supply curve of corns

Q QQ AN A 10

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A decrease in the price of seed will increase the purchasing power of the producer of corn. Thus producer will now purchase more of corn-seed, and thus the corn production will rise.It will again decrease the average cost of production of corn. Thus the producer or seller will now be able to sell more of corns at the same price level. So the supply curve of corn will shift outward.

In the above diagram, the price of corn is measured on the vertical axis, and the supply of corn is measured on the horizontal axis. Initially at the price P₁, the quantity supply of corn was Q_1. The supply curve of corn was then S₁S₁. After the decrease in the price of seed, the supply of corn rises and the supply curve of corn shifts outward to S₂S₂. So at the same price P₁, the producer or the seller of corn can now supply Q₂ amount of corn.

० ५, 323

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A decrease in the local number of grocery stores will cause a decrease in the total market supply of corn.Thus the supply curve of corn will shift inward.

In the above diagram, the price of corn is measured on the vertical axis, and the supply of corn is measured on the horizontal axis. Initially at the price P₁, the quantity supply of corn was Q_1. The supply curve of corn was then S₁S₁. After the decrease in the local number of grocery stores, the total market supply of corn will decrease and the supply curve of corn will shift inward to S₂S₂. So at the same price P₁, the total corn supply will decrease to Q₂ level.

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