How will the following affect the supply curve- Agricultural production if price of input rises?
Answer & explanation
Correct answer: option 3
The correct answer is option 3: Supply curve will shift to left
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 For example, if the technology used to manufacture Hitachi ACs deteriorates (becomes outdated or less efficient), fewer ACs will be supplied at every price level, causing a decrease in supply.
