Supply: the supply curve and what shifts it
Grade 12 Social Studies Worksheet - Building Confidence
Circle the best answer.
Read this first
A smoothie stand's supply (example figures, made up for practice)
Price of a smoothie Smoothies supplied a day $2 20 $3 35 $4 45 $5 60 $6 75 A change in the smoothie's own price moves the stand along its supply curve. A change in anything else, such as the cost of fruit or a fee, shifts the whole curve. Elasticity of supply is the percent change in quantity supplied divided by the percent change in price.
Ari compares the stand's output at $4 and at $5. Which statement does the schedule support?
- Output rises 33 percent while the price rises 33 percent, so supply is unit elastic
- Output rises 15 smoothies, from 45 to 60: a movement along the curve caused by the higher price
- Output rises 15 smoothies because the cost of fruit fell, which shifted the whole supply curve to the right
- Supply increases by 15 smoothies, a shift of the curve to the right at both prices
Bo computes the elasticity of supply for the rise from $4 to $5. Which statement is right?
- Quantity rises 33 percent, so the elasticity of supply is 33 for this price change
- Quantity rises 25 percent for a 33 percent rise in price, so supply is inelastic there
- Quantity rises 15 for a $1 rise, so supply is inelastic because a dollar is a small change
- Quantity rises about 33 percent for a 25 percent rise in price, so supply is elastic there
Cheaper fruit lets the stand supply 15 more smoothies at each price. Esme asks what that does at $4. Which answer fits?
- At $4 the stand supplies 60, a movement along the old curve to the row for $5
- At $4 the stand now supplies 60, a shift of the whole curve right, since fruit cost changed
- At $4 the stand still supplies 45, since just a change in the smoothie's price can change output
- At $4 the stand supplies 30, since cheaper fruit lowers the supply of smoothies
The stand must pay a $1 fee on each smoothie it sells. Jun asks how many it supplies at a $5 price. Which answer fits?
- 75, since a $1 fee raises the price and so the stand supplies more smoothies
- 45, the amount it supplied at $4 before, since after the $1 fee it keeps just $4
- 55, halfway between, since the fee is split between the buyer and the stand
- 60, since the $1 fee is paid by the buyer and does not touch what the stand offers
Apples at a farmers' market (example figures, made up for practice)
Price per bag Quantity demanded Quantity supplied $2 100 20 $3 80 40 $4 60 60 $5 40 80 $6 20 100 The equilibrium price is the price at which quantity demanded equals quantity supplied. A shift of demand or supply changes the quantity at every price.
Demand rises by 40 bags at each price. Milo finds the new price and quantity. Which pair is right?
- $5 and 40 bags: buyers pay more, so they buy the same amount as before
- $4 and 100 bags: price stays put and the whole 40 extra bags sell
- $3 and 80 bags: more demand lowers the price, so more bags sell
- $5 and 80 bags: both the price and the quantity rise
A report says the price of apples fell while more bags were sold. Noah decides which curve shifted. Which is best?
- Supply decreased, since a lower price means that fewer sellers stayed in the market
- Demand decreased, since the price fell when buyers wanted less of the good
- Supply increased: a demand rise would have raised both the price and the quantity
- Demand increased, since more bags were sold and buyers want more
Use this
Card A, "Supply shifters" (in our words). The supply curve shifts when the cost of inputs, technology, the number of sellers, sellers' expectations of future prices, or taxes and subsidies change. A change in the good's own price is a movement along the curve. A change in buyers' incomes shifts demand, not supply. Card B, "Canned beans" (made up). Case 1: the price of steel for cans rises. Case 2: a new canning machine doubles the cans made each hour. Case 3: shoppers' incomes rise. Case 4: canners expect beans to sell for more next month and can store the cans.
Pia reads cards A and B. Which case raises the supply of canned beans?
- Case 3: higher incomes mean shoppers buy more, which raises the supply of cans
- Case 4: canners expect more next month, so they offer more beans today at each price
- Case 1: dearer steel makes cans cost more, so canners supply more at each price
- Case 2: the machine cuts the cost of each can, so canners supply more at each price
Ren reads case 3, where shoppers' incomes rise. Which statement about the curves is right?
- Neither curve shifts, since an income change affects shoppers but not the market
- Supply shifts left, since higher incomes mean canners sell the same cans for less
- Supply shifts right, since canners earn more when shoppers have more income to spend on beans
- Demand shifts right, not supply; supply moves along its curve to the higher price
Tala reads case 4. What happens to the supply of canned beans today?
- Supply increases next month alone, since the expected rise happens next month
- Supply decreases today: canners hold cans back to sell later at the higher price
- Nothing changes today, since an expected price is not the price canners get now
- Supply increases today, since canners expect to earn more and so make more cans now
A student says any rise in price shifts supply to the right because sellers earn more. Zee checks card A. What is the best reply?
- Not so: higher prices cut the quantity sellers offer, which moves the curve left
- Right: card A lists the good's own price among the shifters of supply
- Right: higher prices raise profit, and more profit shifts the whole supply curve to the right
- Not so: a higher own price moves sellers along the curve; a shift needs another change