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Question
Macroeconomics
Posted about 1 month ago

Which of the following statements accurately describes how an event will impact supply?

Choose 1 answer:
(A) An increase in costs of production will cause an increase in the supply curve
(B) An increase in demand will cause an increase in supply
(c) An increase in price will cause supply to increase
(D) A decrease in price will cause supply to increase
(E) A decrease in resource costs will cause an increase in the supply curve
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Answer from Sia
Posted about 1 month ago
Solution
a
Definition of Supply Curve: The supply curve represents the relationship between the price of a good and the quantity of the good that producers are willing to supply
b
Impact of Production Costs: An increase in the costs of production (e.g., higher wages, more expensive raw materials) will cause the supply curve to shift to the left, indicating a decrease in supply. Conversely, a decrease in production costs will shift the supply curve to the right, indicating an increase in supply
c
Impact of Demand: An increase in demand does not directly affect the supply curve. Instead, it affects the equilibrium price and quantity in the market
d
Impact of Price Changes: An increase in the price of a good typically results in a movement along the supply curve, not a shift of the supply curve itself. Similarly, a decrease in price results in a movement along the supply curve
e
Resource Costs: A decrease in resource costs (e.g., cheaper raw materials) will cause the supply curve to shift to the right, indicating an increase in supply
Answer
(E) A decrease in resource costs will cause an increase in the supply curve
Key Concept
Supply Curve Shifts
Explanation
The supply curve shifts to the right (indicating an increase in supply) when there is a decrease in the costs of production, such as a reduction in resource costs. This makes it cheaper for producers to produce goods, thereby increasing the quantity supplied at each price level.

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