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When supply price increase in the short run, the profit of the producer________:
- a)Increases
- b)Decreases
- c)Remains constant
- d)Decreases marginally
Correct answer is option 'A'. Can you explain this answer?
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When supply price increase in the short run, the profit of the produce...
Increases and decreases in supply and demand are represented by shifts to the left (decreases) or right (increases) of the demand or supply curve. ... Demand Increase: price increases, quantity increases. Demand Decrease: price decreases, quantity decreases. Supply Increase: price decreases, quantity increases.
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When supply price increase in the short run, the profit of the produce...
Explanation:
When supply price increases in the short run, the profit of the producer increases due to the following reasons:
1. Increase in Price: When supply price increases, the producer is able to sell the product at a higher price in the market. This results in an increase in revenue and hence profit.
2. Fixed Costs: In the short run, fixed costs remain constant irrespective of the changes in the supply price. Hence, the increase in revenue due to the increase in supply price contributes to an increase in profit.
3. Elasticity of Demand: If the demand for the product is inelastic, the producer can increase the supply price without affecting the demand. This results in an increase in revenue and hence profit.
4. Competition: If the producer faces less competition in the market, he can increase the supply price without losing customers. This results in an increase in revenue and hence profit.
Therefore, it can be concluded that when supply price increases in the short run, the profit of the producer increases.
When supply price increases in the short run, the profit of the producer increases due to the following reasons:
1. Increase in Price: When supply price increases, the producer is able to sell the product at a higher price in the market. This results in an increase in revenue and hence profit.
2. Fixed Costs: In the short run, fixed costs remain constant irrespective of the changes in the supply price. Hence, the increase in revenue due to the increase in supply price contributes to an increase in profit.
3. Elasticity of Demand: If the demand for the product is inelastic, the producer can increase the supply price without affecting the demand. This results in an increase in revenue and hence profit.
4. Competition: If the producer faces less competition in the market, he can increase the supply price without losing customers. This results in an increase in revenue and hence profit.
Therefore, it can be concluded that when supply price increases in the short run, the profit of the producer increases.
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Community Answer
When supply price increase in the short run, the profit of the produce...
Simple way of solving this..
Whenever demand increases, price decreases.
There is an inverse relationship between demand and price. But whenever supply increases, price will also increase. And if price is increasing then profit of a producer also increses...!!
Whenever demand increases, price decreases.
There is an inverse relationship between demand and price. But whenever supply increases, price will also increase. And if price is increasing then profit of a producer also increses...!!
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When supply price increase in the short run, the profit of the producer________:a)Increasesb)Decreasesc)Remains constantd)Decreases marginallyCorrect answer is option 'A'. Can you explain this answer?
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