Question

8. (8 points) Shifts in Supply List three determinants that would shift a supply curve. Give an example of each determinant. For each determinant, what happens to the supply curve if there is an increase? What happens to the supply curve if there is a decrease? Explain what happens to equilibrium price and quantity with the shift in the supply curve. 2.

Answer 1

Supply curve reflect relation between the price and quantity graphically supplied.

Shape od supply curve is positively sloped

3 determines

1)change in technique of production :technology progress raises production, reduce cost of production shifts marginal cost curve down word, supply curve shift right.

Example :ABC LTD chnge use new technology to reduce cost of production that's shfts supply curve right and old and Inferior technology increase cost in production that shfts left to supply curve

2)change in price of other goods :rise in price of other goods induces firm to increases in production of other good for the purpose of earning profit.

Example an increase in price of substitute good in production shifts the supply curve left of given product, if substitute goods falls supply curve shft rght.

3)number of firms of good in market :larger number of firms, larger will be market supply effect of supply curve right Beacause of increase in number of firms lead to competition in market

Example :large number of soaps firm lead to competition in market and supply curve shfts right.

Price and quantity equilibrium when supply shift

​​​​​​If  ​​​supply curve shifts downward, meaning supply increases, the equilibrium price falls and the quantity increases.

demand curve shifting down the supply curve , the equilibrium price and quantity both fall. ... This can be e shown as supply curve shifting rightward which  cause a decrease in the ​​​​​equilibrium along with an increase in the equilibrium quantity.