Question

Which of the following statements is (are) correct?
(x) An increase in the price of a good gives producers an incentive to increase the quantity supplied of the good.
(y) An increase in the price of apples would lead to a movement up the supply curve for apples.
(z) Holding the nonprice determinants of supply constant, a change in price would change supply and shift the supply curve.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (y) only

In general, an advance in production technology will
(x) increase a firm’s costs.
(y) allow firms to raise the price of their product.
(z) shift the supply curve to the right.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

Which of the following is a determinant of supply?
(x) the prices of the inputs used to produce the good
(y) number of sellers in a market
(z) the income of buyers
A. (x), (y) and (z)
B. (x) and (y), only
C. (x) and (z), only
D. (y) and (z), only
E. (z) only

Answer 1

When the price of a good increases, the supply of the good, which is positively related to the prices also increases. That is, increase in price gives the producers the incentive to increase the quantity supplied.

Also, a change in prices, other things being held constant will not shift the supply curve but there only be a movement along the supply curve. Thus option b. (x) and (y) are correct.

________________

When there is an improvement or advancement in technology, the cost of production reduces and the supply curve shifts rightward. Thus, option e. (z) only is correct.

_______________

The supply is determined by the number of suppliers in the market (more suppliers, more is the supply), input prices, prices of substitutes and complements, suppliers' expectations, tax and subsidies, etc.

It does not depend upon the income of buyers. Thus, option b. (x) and (y) only is correct.