Question

In: Economics

The supply of a good available in a market is likely to decrease when: OA. new...

The supply of a good available in a market is likely to decrease when: OA. new technology makes producing the product cheaper. OB. the number of workers able to make the product increases. OC. new regulations increase the cost of making the product. O D. companies believe that the product's selling price will go up.

Solutions

Expert Solution

Option C and Option D are correct.

Explanation:

Option A is incorrect. New technology which makes production of product cheaper will bring down the cost of production. As such, at the same price, more supply will be available. Therefore, supply will increase.

Option B is incorrect. An increase in number of workers able to make the product will bring down the wages (or labour costs). A decrease in cost of production will lead to increase in supply.

Option C is correct. A government regulation increasing the cost of making the product will result in lower quantity of product being available at the same price level. As such supply of the product will reduce.

Option D is correct. An expectation of increase in price will induce the companies to reduce the quantity supplied in the present period so they can sell more when the prices are higher. As a result, supply of the good will decrease.


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