2. Give one reason for a rightward shift in supply curve.
3. Explain how technological progress is a determinant of supply of a good by a firm.
4. Explain any two causes of decrease in supply of a commodity.
5. Consider a market with two firms. The following table shows the supply schedules of two firms: the SS1 column gives supply schedule of firm 1 and SS2 column gives supply schedule of firm 2. Compute the market supply schedule.
Answers
Answer:
2.The reasons for rightward shift of the supply curve are as under: (1) Fall in the price of factors of Production: When prices of factors of production (wages, cost of raw material etc.) decreases, it increases the profit margin of producer/seller which induces him to increase the supply.
3.The level of technology is one of the factors that directly affects the supply of a good. That is, while other things remain the same, there exists a positive relationship between the state of technology and the quantity it produces. With the appreciation in the level of production techniques, per unit production goes down. This encourages the producers to produce higher quantities of goods, thereby increasing the supply of the goods.
4. Two causes of decrease in supply are: (i) Imposition of Unit Tax: It raises cost. Price remaining unchanged, profits fall. This leads to ‘decrease’ in supply.
Explanation:
2. A rightward shift of the demand curve could be due to an increase in income, a change of preferences, decreasing availability of substitutes, or other factors.
3. A depreciation in the production technology raises the per unit cost of production, thereby decreasing the supply of good.
4. Two causes of decrease in supply are:
(i) Imposition of Unit Tax : It raises cost. Price remaining unchanged, profits fall. This leads to ‘decrease’ in supply.
(ii) Rise in Prices of Inputs : It raises cost. Price remaining unchanged, profits fall.
This leads to ‘decrease’ in supply.
Answer:
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