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Determine if the scenario below will cause the position of the SRAS curve to increase, decrease,...

Determine if the scenario below will cause the position of the SRAS curve to increase, decrease, or remain unchanged.

Businesses expect a decrease in the price of resources in the near future.

A) Increase

B) Decrease

C) Remain unchanged

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Answer #1

Seller's expectation will certainly affect the supply curve, if the seller expect the price of the resource is going to decline in the future he will produce less today , this is because producing more today is expensive and he will loose the profit. So if the seller a expects a decrease in the price of the resource in the future he will produce less so the supply curve will shift leftwards. Supply decreases.

Ans: Decrease.

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