Economics: Supply
(Very Short Questions Answers)
Q1: Define supply.
Answer: Supply may be defined as the amount of a commodity that the producers are willing to offer for sale at different prices during a period of time.
Q2: Define stock.
Answer: It refers to the total quantity of goods which is available with the sellers in the market at a particular point of time.
Q3: Name three elements of supply.
Answer:
(i) Quantity of a commodity
(ii) Price of a commodity
(iii) Particular time period
Q4: What is Supply Schedule?
Answer: It is a tabular statement which shows various quantities of a commodity being supplied at various levels of price, during a given period of time.
Q5: What does supply indicate?
Answer: Supply indicates a firm’s willingness to sell at a particular price and time.
Q6: What is Market Supply Schedule?
Answer: It is a schedule which represents the total quantity of a commodity that all producers will supply at each market price per period of time. It is a horizontal summation of individual supply schedules.
Q7: How is supply different from stock?
Answer: Supply is a part of the stock.
Q8: What is the Supply Curve?
Answer: It is a graphical representation of the supply schedule.
Q9: What is meant by supply function?
Answer: Supply function means the relationship between the supply of a commodity and various factors determining it.
Sₓ = f {Pₓ, Py, Nf, G, Pf, T, Eₓ, Gₚ}
Q10: State any two factors determining supply.
Answer:
(i) Technological progress
(ii) Prices of factors of production
Q11: What is the Law of Supply?
Answer: Other things being constant, supply increases with a rise in price and supply decreases with fall in price.
Q12: Define individual supply.
Answer: Individual supply may be defined as a supply of an individual firm in the market at a given price and time.
Q.13: What is market supply?
Answer: Market supply refers to the estimates of quantity supplied of the commodity by all the firms per time period at various alternative prices.
Q14: What is the Individual Supply Curve?
Answer: It shows the quantity supplied by an individual firm at various prices.
Q15: State the nature of the relationship between price and supply.
Answer: Positive relationship.
Q16: What is the nature of a supply curve?
Answer: A supply curve is positively sloped.
Q17: What is meant by change in quantity supplied?
Answer: A change in quantity supplied means a movement along a given supply curve because of a price change.
Q18: When does 'shift' in supply curve takes place?
Answer: When there is a change in the factor affecting supply other than the own price of the good.
Q19: What is meant by change in supply?
Answer: A change in supply means a change in the quantity supplied because of a factor other than the price of the commodity.
Q20: What is meant by the shift in the supply curve?
Answer: Shift in supply curve means that there is a new supply curve for the consumer due to changes in factors other than the price of the commodity.
Q21: What are the determinants of supply?
Answer: Determinants of supply are those elements that change a producer’s willingness and ability to produce the product at all prices. Examples are Costs of production, raw materials, subsidies etc.
Q22: What is meant by movement on the supply curve?
Answer: When the change in supply is shown on the same supply curve, it is known as a movement on the supply curve.
Q23: What is a contraction of supply?
Answer: When a fall in the price of a commodity leads to a decrease in quantity supplied of a commodity, it is called contraction of supply.
Q24: How is the supply of a commodity affected by the prices of other commodities?
Answer: When prices of other commodities increase, producers will be attracted to other commodities and supply of the commodity will fall.
Q25: What causes a downward movement along a supply curve of a commodity?
Answer: A fall in the price of a commodity causes a downward movement along a supply curve of a
commodity.
Q26: List the two causes of "Decrease" in the supply of commodity?
Answer:
1. Imposition of unit tax
2. A rise in prices of inputs.
Q27: What causes an upward movement along a supply curve?
Answer: A rise in the price of the same commodity causes an upward movement along a supply curve.
Q28: Why do supply curves have an upward slope?
Answer: Supply curves have an upward slope because of increasing production costs.
Q30: What is meant by an increase in supply?
Answer: An increase in supply means more of the commodity is supplied at the same price.
Q31: What happens to the supply curve when there is an increase in supply?
Answer: Supply curve shifts to the right.
Q32: Is it true that supply creates its own demand?
Answer: Yes
Q33: State any two reasons of increase in supply?
Answer:
(i) Improvement in technology
(ii) Fall in the price of inputs.
Q34: Give one reason for a rightward shift in the supply curve.
Answer: Fall in the prices of factors of production.
Q35: What is “decrease” in supply?
Answer: A decrease in supply means that less of the commodity is supplied at the same price than previously.
Q36: Name the situation where producers are willing to supply more or less of a commodity because of factors other than the price of a commodity.
Answer: Shift in the supply curve.
Q37: Define unitary elastic supply.
Answer: When percentage change in supply is equal to percentage change in price, it is called a unitary elastic supply.
Q38: If the wages of the workers increase, what will be the change in the supply curve of a commodity?
Answer: Supply curve will shift to the left.
Q39: What happens to the supply curve when there is a decrease in supply?
Answer: Supply curve shifts to the left.
Q40: State any two of a decrease in supply.
Answer:
(i) A rise in the prices of inputs
(ii) Increase in the prices of another related commodity.
Q41: Due to an improvement of a technology the marginal cost of production of televisions has gone down. How will it affect the supply curve of television?
Answer: Supply curve of television will shift to the right.
Q42: What effect does a cost-saving technical progress have on the supply curve?
Answer: The supply curve will shift to the right.
Q43: What effect does an increase in input price has on the supply curve?
Answer: The supply curve will shift to the left.
Q44: What effect does an increase in excise tax?
Answer: The supply curve will shift to the left.
Q45: If a farmer grows rice and wheat, how will an increase in the price of wheat affect the supply curve of rice?
Answer: The supply curve of a rice will shift to the left.
Q46: Is the following statement true or false?
"Supply curve of goods shifts to the right when prices of other goods rise. "
Answer: False
He who controls the money supply of a nation controls the nation.
-James A. Garfield
-James A. Garfield
Q47: What is meant by market period?
Answer: Market period is that short period within which firms cannot adjust their output to any change in price.
Q48: What will be the nature of the supply of a firm in the market period?
Answer: Supply curve of a firm in the market period will be vertical.
Q49: How will an increase in the number of firms shift the market supply curve?
Answer: An increase in the number of firms will shift the market supply curve to the right.
Q50: Why do producer supply less of a commodity at the lower prices?
Answer: Because of reducing profit.
Q51: Define elasticity of supply.
Answer: It refers to change in quantity supplied of a commodity in response to change in its price.
Q52: When is a supply of a commodity called elastic?
Answer: The supply of a commodity called elastic when the percentage change in the quantity supplied of a commodity is more than the percentage change in the price of the commodity.
Q53: Price elasticity of supply of a good is 0.8. Is the supply elastic or inelastic and why?
Answer: When price elasticity of supply of a good is 0.8, the supply is inelastic because the price elasticity of supply is less than 1.
Q54: Why does price elasticity of supply measures or quantify?
Answer: Price elasticity of supply measures or quantifies the responsiveness of quantity supply to changes in price.
Q55: To what extent supply can be an increase during a short period and long period?
Answer: Supply can be increased to the extent of available productive capacity during a short period and to any extent during the long period, keeping in view the changes in fashion and taste.
Q56: When will be the supply curve parallel to the x-axis?
Answer: When supply is perfectly elastic.
Q57: When will be the supply curve parallel to y-axis?
Answer: When supply is perfectly inelastic.
Q58: The supply of a commodity does not at all respond to change in the price of the commodity. What will be the elasticity of supply?
Answer: Zero
Q59: If two supply curves intersect, which one does have higher price elasticity?
Answer: If two supply curves intersect, the flatter one has higher price elasticity at the point of intersection.
Q60: What is price elasticity associated with a straight line supply curve passing through the origin?
Answer: Elasticity = 1.
Q61: What is the price elasticity of supply of a commodity whose straight line supply curves passes through the origin forming an angle of 75?
Answer: Less than one (Eₛ < 1)
Q62: What will be the increase in the quantity supplied if price increases by 10 % and elasticity of supply are one(1)?
Answer: 10%
Q63: Give an example of how a change in the prices of other goods affects?
Answer: An increase in the price of cucumbers decreases the supply of watermelons.
Q64(HOTS): What is supply-side economics?
Answer: Supply-side economics suggests that the best way to achieve economic growth is by maximizing the incentive to produce, or supply goods and services.
Q65(HOTS): What are substitutes in supply?
Answer: These are two goods where an increased production of one means diverting resources
away from producing the other.
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