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JAMB Economics 2000 Question 12

Question 12

Theory of Supply

Use the diagrams to answer the question.
The supply of commodity II increasing from S1S1 to S2S2

Diagram for this question
  1. A.leads to a fall in price from OP1 to OP2
  2. B.moves the price below OP2
  3. C.increases the price from OP2 to OP1
  4. D.moves the price to OP1
Show the answer and explanation

Answer: A (leads to a fall in price from OP1 to OP2)

Explanation

With demand unchanged, a rightward shift of supply from S1S1 to S2S2 lowers the equilibrium price from OP1 to OP2.