Question

1. What does a supply curve illustrate? Other than its own price, what are the determinants of the supply of a commodity. What would make a supply curve shift to the right?
2. Imagine that the market for orange juice is in equilibrium at a price of $8 per gallon. Provide two demand-related and two supply-related reasons why the equilibrium price could fall to $7.00 per gallon.

please after every answer mention the references . also please type the answer write answers in your own words

Answer 1

ans 1=

Supply curve ( in economics) is a graphical representation of the relation between product price & amount of product which a seller is ready & capable to supply. Product price is depicted on the vertical axis & amount of product supplied is depicted on the horizontal axis.

Factors affecting supply of a commodity ( other than price of that commodity): Cost of Production, Technology, Natural conditions, Transportation Conditions, Factor Prices and availability, Governmental Policies, Prices of Related products.

Rightward shift of supply curve of a commodity-

An escalation in supply happens when more is supplied at each level of price, this could happen for the following reasons-

1. A fall in costs of production- This implies that business can supply more at each level of price. Lower expenses could be due to lower wage rates, lower raw material expenses
2. More companies- An augmentation in the number of firms will cause an augmentation in supply.
3. Investment in capacity- Enlargement in capacity of prevailing companies, e.g. constructing a new factory
4. Related supply- An augmentation in supply of a related product ,e.g., beef & leather
5. Weather- Climatic circumstances are very essential for agricultural produce
6. Technological improvements-Enhancements in technology, e.g., computers lessens firms expenses
7. Lower taxes- Lower direct taxation (for example- tobacco tax, VAT) diminish the cost of goods
8. Governmental subsidies- Increase in governmental subsidies will also lessen the cost of products, for example, train subsidies lessen the level of prices of train tickets.

ans 2=

Supply -related factors-

• Investment in capacity- Enlargement in capacity of prevailing companies, e.g. constructing a new factory
• Lower taxes- Lower direct taxation (for example- VAT) diminish the cost of goods

Demand -related-

• Fall in income
• Fall in price of a substitute product (for example, soft drinks)