Question 6
Theory of SupplyA rightward shift of the supply curve can be caused by:
I. A fall in the cost of raw materials
II. Technological improvements in production
III. An increase in the price of the good itself
IV. A government subsidy to producers
- A.I, II and IV only
- B.I and III only
- C.II, III and IV only
- D.All of the above
Show the answer and explanation
Answer: A (I, II and IV only)
Explanation
Lower input costs, better technology and subsidies raise supply. A change in the good's own price only moves along the curve.