Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Theory of Firms under Perfect Competition

Question:

Assertion: When supply of a commodity changes due to changes in other factors than price of the commodity, it is known as change in supply.

Reasoning: Increase in supply results in a shift of the entire supply curve to the left.

Options:

Both Assertion (A) and reasoning (R) are correct and R is the correct explanation of A.

Both Assertion (A) and reasoning (R) are correct and but R is not the correct explanation of A.

Assertion (A) is true but Reasoning (R) is not correct.

Assertion (A) is not true but Reasoning (R) is correct.

Correct Answer:

Assertion (A) is true but Reasoning (R) is not correct.

Explanation:

The correct answer is option 3: Assertion (A) is true but Reasoning (R) is not correct.

Assertion:Correct: When the supply of a commodity changes due to factors other than price (e.g., technology, production cost, government policies, etc.), it is called a change in supply.This leads to a shift of the entire supply curve rather than movement along it.

Reasoning:Incorrect. Increase in supply means that more quantity is supplied at the same price, leading to a rightward shift of the supply curve, not a leftward shift. A leftward shift represents a decrease in supply, meaning less quantity is supplied at the same price due to unfavorable conditions like higher input costs or government restrictions.

2. When supply of a commodity changes due to changes in other factors than price of the commodity, it is known as change in supply. For example, change in supply of a commodity due to change in technology etc. It is of two types:

a. Increase in Supply:This refers to a shift of the entire supply curve to the right. It occurs when factors other than the price of the commodity (e.g., technology, input costs) change, leading to a greater quantity supplied at every price level. For example, there is improvement in technology which reduces the cost of production of Hitachi ACs, leading to an increase in the supply of ACs at every price level.

b. Decrease in Supply:This is where the entire supply curve shifts to the left. This occurs when factors other than the price of the item change. For example, if the technology used to manufacture Hitachi ACs deteriorates (becomes outdated or less efficient), fewer ACs will be supplied at every price level, causing a decrease in supply.