Question

Variables typically included in a multivariate supply function (other than the price and quantity of the item the supply function represents) are prices of other goods that use similar input resources for production, the number of suppliers, techniques of production, taxes and subsidies, prices of input resources, weather, and expectations. Please answer the following questions about the affect changes in other variables might have on the supply of the item. These changes will either cause supply to increase (shift right) or decrease (shift left). Use either word as applicable, for the short answer.

1. If the market price of gasoline returns to the near $4.00 per gallon level then demand for gas-gulping large autos is likely to decrease and manufacturers of these autos are likely to _____________ their supply:

2. A relative increase in the productivity of the technology used to produce the item being considered is likely to _____________________ its supply.

3. Hailstorms have pelted south central Texas grape vineyards, spoiling acres of grapes. This is likely to ______________ the supply of grapes for Texas wine.

4. A manufacturer, operating with a fixed production budget, discovers that the cost of input resources is increasing. The manufacturer is likely to ___________________ the quantity of the product produced.

5. The six-spotted evil weevil has attacked California’s broccoli crops. Their supply of broccoli is thus likely to:

Answer 1

If the market price of gasoline returns to the lower price of $4 per gallon, the demand for gas gulping autos which previously were likely to store huge gas is likely to decrease, the decreasing demand will then urge the manufacturers to reduce their supply else the higher supply and lower demand will reduce their prices to a very low level causing losses to et manufacturers.

An increase in the productivity of the technology will make the production process to produce more for the same resources thus the supply of the same is likely to increase.

Hailstorm has pelted the vineyards which must have damaged the crop and this would have reduced the quantity of total grapes and thus the supply will decrease.

A manufacturer who has a budget to spend, when discovers that the cost of input is increasing will reduce the amount of input purchase due to the fixed budget. This will further reduce the quantity of output produced.

The six spotted evil weevil has attacked the broccoli crops implying that the crop must have been damaged at least partially. This would have reduced the amount of crop and thus the supply is likely to decrease.