Question

What effect will each of the following have on the supply of auto tires )السيارات إطارات?)
Write your answer in the second column of the table!
Case (Event) Answer (effect on supply of auto tires)
a. A technological advance in the methods of
producing tires.
b. A decline in the number of firms in the tire
industry.
c. An increase in the prices of rubber used in
the production of tires.
d. The expectation that the equilibrium price of
auto tires will decline in the near future.
e. The granting of a 50-cent-per-unit subsidy
for each auto tire produced.

Answer 1

a. A technological advance in the methods of
producing tires.

Answer- A technological advancement will imply better productivity of a firm resulting in more output at a comparatively lower cost.So a technological advancement will increase the supply of auto tires.

b. A decline in the number of firms in the tire
industry.

Answer- A decline in the number of firms in the industry will decrease the supply of auto tires as there will be less firms producing tires.

c. An increase in the prices of rubber used in
the production of tires.

Answer- An increase in the prices of rubber used in production of tires will increase the manufacturing cost which will result in decrease in the supply of tires.

d. The expectation that the equilibrium price of
auto tires will decline in the near future.

Answer- This will result in increase in the current supply of tires as the manufacturers expect that the price of tires will decrease in the near future so they will produce more now.

e. The granting of a 50-cent-per-unit subsidy
for each auto tire produced.

Answer- A 50-cent per unit subsidy will increase the supply of tires as now the manufacturers have to incur less cost in production of tires.

Hope this helps!