Question

A. Define supply as an economist would.
B. List and explain three (3) non-price factors that will shift the supply curve.
C. If the cost of production of fountain pens falls, how will the market for fountain pens be impacted? (hint: start by drawing the appropriate supply and demand curves)

Answer 1

A) Supply is defined as the quantity of a good that a firm is willing to supply at a given price.As per the law of supply, other things remaining same the quantity supplied increases when there is an increase in the price of the good and quantity supplied of good decreases when the price of the good decreases.

B) The three non-price factors that shift the supply curve are:

-Input costs: when the cost of input decreases, the cost of production will decrease which will encourage the producers to supply more goods in the market and it will shift the supply curve to the right.

-The number of sellers: when the number of sellers in the market increases then the quantity produced will increase which will increase the supply of the good in the market.

-Taxes and Subsidies: when the taxes on the goods decreases or the government increases the subsidies being provided on the good, then the supply of the good will increase in the market.

C)

As shown above, when the cost of production of fountain pens falls, the producers would be able to produce more pens at lower per unit cost using the same amount of resources which will increase the market supply and shift the supply curve to the right.