Using your knowledge of supply curves, show the impact of the following changes on the respective supply curves:

An increase in construction workers’ wages on the supply curve for a new houses;
The development of a new pesticide on the supply curve for wheat;
The effect of a drought on the supply curve for corn; and
The effect of an increase in the price of shoes on the supply of shoes.

Solutions

Expert Solution

In the above all figures, x-axis shows quantity and y-axis shows price. S is the supply curve. Panel A,B,C and D shows following events respectively.

A). As the result of an increase in construction workers’ wages , the cost of production increases, the supply curve shift to the left.

B).The development of a new pesticide results increse in production. The supply increases, the supply curve shift to the right.

C).As the result of the effect of a drought, the supply decreases, the supply curve shift to the left.

D). The effect of an increase in the price of shoes on the supply of shoes, occur a movement along the supply curve.The quantity supplied increases from qs to qs1.

Rahul Sunny answered 1 year ago

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