Question

5. a) What are the determinants of Supply? b) What happened to supply curve and equilibrium price and quantity when Government provides subsidy to corn grower. Show graphically and explain by using 4-steps Process. B. Multiple choice questions: 1. At equilibrium price quantity demanded is a greater than quantity supplied b. equal to quantity supplied c. smaller than quantity supplied 2. When demand declines and supply stay the same a. equilibrium quantity rises b. equilibrium quantity declines c. equilibrium quantity stays the same 3. A supply schedule is determined by the wishes of a. sellers b. buyers c. buyers and sellers d. neither sellers nor buyers and when price is raised?

Answer 1

5.a. Determinants of supply-

1. Price

2. Subsidy and taxes

3. Availability of factors

4. Cost of factors of production

5. Technology

b.

supply New A supply E- Demand a a' Quantity

Four step process-

1. Original demand and Supply curve meet at equilibrium E with equilibrium price=P and equilibrium quantity=Q

2. Subsidy to the producers affect the supply curve.

3. Subsidy reduces the cost of production, so supply curve shifts rightward.

4. New equilibrium E' is where new supply curve and demand curve meets.

Equilibrium price falls and equilibrium quantity rises.

New equilibrium price= P'

New equilibrium quantity=Q'