Supply

Question 1

What are the non-price determinants, which cause shift in supply curve?

Answer 1

There are following non price determinants which cause shift in supply curve:
1. Cost of input
2. Productivity of labour
3. Taxes or subsidies
4. Use of technology
5. Climatic conditions

Question 2

What is supply?

Answer 2

Supply refers to the quantity supplied by the producers at a given price.

Question 3

Describe shift in supply curve.

Answer 3

Rightward shift reflects increase in supply while leftward shift indicates decrease in supply at same price.

Question 3

Describe the movement of supply curve.

Answer 3

Movement along the supply curve is due to changes in price only. However shift in supply curve takes place due to non- price determinants.

Question 4

Describe supply curve.

Answer 4

Supply curve is a positive sloping curve as supply increases with increase in price.

Question 5

What is Price Elasticity of Supply? (PES)

Answer 5

PES is the responsiveness of supply to a change in price.

Question 5

How to calculate PES?

Answer 5

PES = (% change in quantity supplied) / (% change in price)

Question 6

What factors determine the elasticity of supply?

Answer 6

Following factors determine whether a particular
product has elastic supply or inelastic supply:
1. Time taken to produce the product
2. Time period involved
3. Willingness of the producer
4. Availability of spare capacity
5.Ease with which labour can be substituted with capital
6. Sate of perishability
7. Mobility of factors of production