The correct answer is option 4: All of them
A shift in the supply curve occurs when factors other than price change, leading to an increase or decrease in supply at all price levels. The following factors can cause a shift in the supply curve:
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Number of firms change: More firms entering the market increase supply, shifting the supply curve rightward, while firms exiting the market decrease supply, shifting it leftward.
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Goals of the firm change: If firms prioritize higher sales volume over profit maximization, they may produce more, shifting supply rightward. If they focus on higher profit margins, they may reduce output, shifting supply leftward.
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Costs of the firm change: If production costs decrease (e.g., lower raw material costs, improved technology), firms can produce more at the same price, shifting supply rightward. If costs increase, supply shifts leftward.
If there is a change in price, it will lead to a movement along the supply curve, not a shift in the supply curve.
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Increase in price:
- When the price of a good increases, the quantity supplied increases because producers are willing to supply more at a higher price.
- This is called an upward movement along the supply curve.
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Decrease in price:
- When the price of a good decreases, the quantity supplied decreases because producers are less willing to supply at a lower price.
- This is called a downward movement along the supply curve.
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