To distinguish between a
movement along the curve and a shift of the curve.
II. Data
The supply of tea is
described by Q = a + bP,
where a
and b
are parameters, P
is the price in $/ton and Q
is the quantity supplied (in tons).
Select values for the
parameters a
and b.
Select the market price of
tea.
Click on Gimme
Q! to obtain quantity supplied
by tea producers.
III. Questions
Explain why the parameter b
is likely to be positive.
Select values of the
parameters: a
= -20, b
= 0.5.
Rewrite the equation
with P
as a function of Q,
i.e. with P
on the LHS of the equation.
Sketch the supply curve
with P
on the vertical axis. Indicate its slope and intercepts.
Suppose a
goes from -20 to -15. What development in the tea market might have
caused this to happen?
[Hint: The change in a
from -20 to -15 is equivalent to a rise in supply.]
Sketch the new supply
curve for a
= -15.
Suppose a
= -10 and b
= 1.5, and the market price of tea rises from from $50/ton to $60/ton.
Consider the statement: "The increase in price from $50/ton to $60/ton
will cause supply to fall from 100 to 85 tons, ceteris
paribus".
What are the various
things wrong with the statement?
Write a corrected
statement.
IV. Additional questions
If supply
falls,
which of the following will occur?
The supply curve will
shift to the left.
The supply curve will
shift to the right.
There will be an upward
movement along the curve.
There will be a movement
along the curve downwards.
An increase in the supply of
corn will be caused by which of the following?
The price of fertilizers
increases.
The demand for corn
rises.
Consumers' incomes go
up.
Farmers begin using
better seeds.
When drawing a supply curve,
the variables that are held fixed are
The price of the good
Consumers' incomes
Prices of inputs
Both a and b
Both b and c
A movement along the supply
curve for a good will be caused by
A change in the prices
of inputs
A change in technology
A change in the price
of the good
Both a and b
All of the above
A shift in the supply curve
may be caused by a change in