Question

Examine the effect of the following on the supply curve of good x
1. Fall in the price of good x
2. Rise in the price of factors producing good x

Answer 1

1. If a fall in the price of goods results in Supply will also falls (S| P|).

2.If rise in the price of factors producing increases which results in the decrease of supply.

Answer 2

1. Good x will become cheaper and

Easily available and its consumption rate will be increase.

2. Good x will become expansive that lead to decrasement in its consumptionrate.