Question

An increase in supply means that:

a.the supply curve has shifted leftward.

b.there is an upward movement along the supply curve.

c.producers are willing to sell more at each price.

d.there is a downward movement along the supply curve.

An increase in the equilibrium price and quantity in a market occurs when there is a:

a.rightward shift of the demand curve, given an upward-sloping supply curve.

b.leftward shift of the demand curve, given an upward-sloping supply curve.

c.rightward shift of the supply curve, given a downward-sloping demand curve.

d.leftward shift of the supply curve, given a downward-sloping demand curve

A decrease in the equilibrium price and an increase in the equilibrium quantity occurs when there is a:

a.rightward shift of the demand curve, given an upward-sloping supply curve.

b.leftward shift of the demand curve, given an upward-sloping supply curve.

c.rightward shift of the supply curve, given a downward-sloping demand curve.

d.leftward shift of the supply curve, given a downward-sloping demand curve.

Suppose the demand for and the supply of a good increases simultaneously. Which of the following is likely to be true in this case?

a.The equilibrium price increases, unequivocally.

b.The equilibrium price decreases, unequivocally.

c.The equilibrium quantity increases, unequivocally.

d.The equilibrium quantity decreases, unequivocally.

Answer 1

Since the law of supply stats that there is a direct relationship between price and quantity supplied and other factors which affect the supply remains same. The supply curve shows the direct relationship between price and quantity supplied. The determinants are;

Technology, costs of inputs and number of potential suppliers.

When supply increase due to an increase in the price of good, it is called an increase in the quantity supplied. When supply increase factors other than its own price, then it is called an increase in the supply. So in this case there will be rightward shift of the supply curve.

Hence it can be said that an increase in supply means that producers are willing to sell more at each price.

Hence option C is the correct answer.

2.

When the demand increase or demand shifts rightward from D to D1 while Supply curve is upward sloping, then equilibrium price increases certainly and equilibrium quantity will also increase certainly.

All this has been shown in the below diagram.

Hence option a is the correct answer.

3.

When the demand curve is downward sloping and supply curve shifts rightward. It means supply increase. As a result equilibrium price decreases and quantity increases. All this has been shown in the below diagram.

Hence option C is the correct answer.

4.

When the demand and supply both increase simultaneously, then both demand and supply curve both shifts rightward. As a result, it is certain that equilibrium quantity will increase but it cannot be said whether equilibrium price will increase, decrease or remains the same. It depends on the magnitude at which demand and supply curve shifts. It means that the equilibrium quantity increases, unequivocally.

Hence option c is the correct answer.