Question

5: SUPPLY-Ecobits Name: Pd. Date: Answer the questions below to learn more about demand schedules and demand curves. 1. Use the data in the schedule below to plot a supply curve for ecobits. Label the curve SC1. Also, correctly label the axes of the graph. Supply Schedule for Ecobits Price per ecobit 5€ 10¢ 15€ 20€ 25€ 30€ 35€40€ Quantity demanded 100 150 200 250 300 350 400 450 in thousands) Supply Curve for Ecobits 2 a. Use the supply schedule and supply curve to answer the following questions. If the price of ecobits moves from 15 cents to 20 cents, what happens to the quantity of ecobits supplied? Why? b. If the price of ecobits moves form 25 cents to 20 cents, what happens to the quantity of ecobits supplied? Why?

Answer 1

Q1.

Supply Curve for Ecobits sci Price Quantity

Q2.
A.
If price increases from 15 cents to 20 cents, we can see in the supply schedule that quantity supplied increases from 200,000 to 250,000.
Thus with increase in prices from 15 to 20, we have increase in quantity of Ecobits supplied.
Increased prices motivate the producers to produce more and supply more. Higher prices act as incentive for the producers to produce and supply more. Thus we have increase in quantity of Ecobits supplied.

B.
If price decreases from 25 cents to 20 cents, we can see in the supply schedule that quantity supplied decreases from 300,000 to 250,000.
Thus with decline in prices from 25 to 20, we have decline in quantity of Ecobits supplied.
Decreased prices demotivate the producers to produce and supply. Thus producers produce and supply less. Thus we have decline in quantity of Ecobits supplied.

C.
The generalization can be made that there is a positive or direct relationship between price and quantity supplied.
When price increases, quantity supplied also increases.
When price falls, quantity supplied also falls.

Q3.
A.
Non price factors that affect supply.

Numbers of sellers in market.
State of technology used in production process.
Amount of government regulation i.e taxes , subsidies.
Change in prices of inputs.
Prices of related goods.

B.
As the prices of the resources used in the production of ecobits increase, it becomes more costly to produce ecobits.
Government placing strict pollution controls on the manufacturing of ecobits, thus producers have to incur increased costs of pollution control. This too further increases the costs.
As costs rise, profit margins fall, producers are demotivated thus they produce less and supply less.
Reduction in supply means for each price level there is less quantity supplied, thus the supply curve would shift to the left.

Supply Curve for Ecobits SC2 sc1 Price Quantity

C.
As production process becomes more efficient because of use of new technology. There is decline in costs of production. As costs fall, profit margins rise. Producers are motivated and thus they increase production and supply.
New producers also enter the market with the aim of earning profits and thus supply further increases.
Increase in supply means for each price level there is more quantity supplied, thus the supply curve would shift to the right.

Supply Curve for Ecobits SC2 sc1 SC3 Price Quantity