Question

Using a product of your choice, construct a table that illustrates increase in supply. Give your table a title, for example, "Increase in Supply for Flower Pots". Label your column headings with details that include the reason for the increase in supply. Use realistic numbers and 5 price-quantity combinations.

***PRODUCT: CAKE***

Answer 1

Question - Using a product of your choice, construct a table that illustrates increase in supply. Give your table a title, for example, "Increase in Supply for Flower Pots". Label your column headings with details that include the reason for the increase in supply. Use realistic numbers and 5 price-quantity combinations.

***PRODUCT: CAKE***

Answer - According to the law of supply, price and the quantity demanded of a product are directly related. This means that higher the price of the product, higher will be the quantity supplied. Supply for a product refers to the quantity that producers want to sell at that price. Since quantity supplied and price of the good is directly related, the supply curve is upward rising.

Let us consider the market for cakes. An increase in supply of cakes would mean rightward shift of the supply curve.

An increase in supply of cakes can be caused by the following reasons:

• Increase in the number of sellers producing sellers
• Reduction in the costs of production or fall in the price of inputs
• Favorable climatic conditions
• Advanced technological innovations

Let us now assume that the price of butter, which is an important ingredient used in the production of cake falls. Since butter is an essential input used in cake production, reduction in price of butter will result in increase in supply of cakes.

Let us now refer to Table 1, which refers to the supply schedule for cakes.

Table 1: Increase in Supply for Cakes

Market price of 1-pound cake	Price of essential input (butter)	Quantity supplied of 1-pound cake
$22	$4.49	15
$22	$4.29	17
$22	$3.99	21
$22	$3.59	26
$22	$2.99	32

I have labelled the columns with appropriate headers.

The market price is constant at $22. However, the price of butter has fallen gradually from $4.49 to $2.99 which is the main reason for the increase in supply because when price of input falls, production becomes cheaper and profitable and so producers increase the supply of cakes.