What will be the effect on the supply curve of a good 'A' when the number of firms producing it increase?
Answer & explanation
Correct answer: option 1
The correct answer is option 1: Supply Curve will shift to right
- More firms enter the market, leading to an overall increase in the production capacity of Good A.
- Since more producers are supplying Good A, the total market supply increases.
- At each price level, a greater quantity of Good A will be available.
- Here, the supply of the Good 'A' has changed due to changes in other factors than price of the commodity, it is known as change in supply resulting in shifting of Supply Curve.
- The supply curve of Good A shifts to the right.
- This indicates that at the same price levels, more quantity of Good A will be supplied than before.