Question

Explain the effect of the following on the market supply of a good:
[1] Increase in price
[2] Reduction in per unit

Answer 1

Answer:

Demand Increase: price increases, quantity increases. Demand Decrease: price decreases, quantity decreases. Supply Increase: price decreases, quantity increases. Supply Decrease: price increases, quantity decreases.

.2

Reduction per limit

Explanation:

The effect of such a tax is to increase the price seen by consumers by the amount of the tax at every point along the supply curve. Therefore a reduction in the tax will in essence shift the market supply curve downward by the amount of the reduction.