(Q1) When does ‘shift’ in supply curve take place ?
Ans: when there is change in factor affecting supply of good other than price of own good
(Q2) When does ‘decrease’ in supply take place ?
Ans: when supply fall due to other factors than pric eof own good like rise in input price
(Q3) Examine the effect of
(a) fall in the own price of good X and
(b) rise in tax rate on good X, on the supply curve. Use diagrams. (6M)
Ans: (a) Fall in own price reduces (contracts) supply and the producers moves along the same curve S from A to B when price falls from OP1 to OP2 and supply falls from OQ1 to OQ2. (2) diagram : (1)
(b) Rise in tax rate increase the cost of the goods. So its Supply decreases. This shifts the supply curve S1 to S. Price remains unchanged at OP while supplied decreases/falls from OQ1 to OQ2.
(Q4) Explain the distinction betwen “change in quantity supplied” and “change in supply”. Use diagram.
Ans: “Change in quantity supplied” means change in supply due to change in own price of the good.
Diagrammatically, it implies movement along the supply curve. When the producer moves from A to B, the rise in quantity of the good from OQ1 to OQ2 is on account of rise in price from OP1 to OP2. (Answer based on downward movement is also correct) “Change is supply” means change in supply due to change in any factor other than the own price of the good.
Diagrammatically, it means shift of supply curve when producer moves from A to B, the price remains unchanged at OP while the supply curve shift from S1 to S2. When the producer shifts from S1 to S2 the supply falls from OQ1 to OQ2. (Answer based on shift to the right is also correct)
(Q5) When price of a commodity falls from Rs.12 per unit to Rs. 9 per unit, the producer supplies 75 percent less output. Calculate price elasticity of supply.
(Q6) When price of a good rises from Rs.10 to Rs.12 per unit, the producer supplies 10 percent more. Calculate price elasticity of supply. (4M)
(Q7) When price of a good rises from Rs. 8 per unit to Rs.10 per unit, producer supplies 40 units more. Price elasticity of supply is 2. What is the quantity supplied before the price change ?Calculate.(4M)
(Q8) A producer supplies 80 units of a good at a price of Rs. 10 per unit. Price elasticity of supply is 4. How much will he supply at Rs. 9 (4)
Ans: 48 Units
(Q9) Price elasticity of supply of a good is 2. A producer supplies 100 units of a good at a price of Rs. 20 per unit. At what price will he supply 80 units.
Ans: 18 units
(Q10) When price of a good rises from Rs. 12 per unit to Rs. 15 per unit the producer supplies 50 per cent more output. What is the price elasticity of supply ? Calculate
Ans: Es = 2
(Q11) What is perfectly elastic supply ? When price falls by ‘ 2 per unit, supply falls from 100 units to 80 units. Price elasticity of supply is 2. What was the price per unit before change ? Calculate.
Ans: Perfectly elastic supply refers to supply which changes drastically even when there is a small change in price.
(Q12) A producer supplies 100 units of a good at a price of ‘ 20 per unit. Price elasticity of supply is 2. At what price will he supply 50 units ? Calculate.
Ans: rs 20
(Q1) Define market supply. Explain the factor ‘input prices’ that can cause a change in supply (4M)
Ans: The sum of output of a commodity by all its producers at a given price during a given period is called market supply. (1M)
When input price rises (falls), the COP increases (decreases). Price of the good remaining the same, it reduces (increases) profits. So the producers produce less (more) and thus market supply decreases (increases). (3M)
(Q2) Explain the geometric method of measuring price elasticity of supply. Use diagram.
(Q3) Explain the distinction between ‘change in supply’ and ‘change in quantity supplied.’
(Q4) Explain any four factors that affect the supply of a good.
(Q5) Explain any two causes of ‘increase in supply’ of a commodity.
(Q1) When the price of a commodity changes from Rs. 4 per unit to Rs. 5 per unit, its market supply rises from 100 units to 120 units. Calculate the price elasticity of supply. Is supply elastic ? (4M)
Ans: 0.8 , No
(Q2) (i) Which of the following measures of price elasticity shows elastic supply? (1M)
(b) 0.5 (c) 1.0
(ii) Which of the following does not cause shift of supply curve of a good ? (1M)
(a) Price of input
(b) Price of the good
(c) Goods and service tax