Concept of Supply & Elasticity of Supply

1 Mark Questions

1. What is market supply of product? (All India 2014) or

Give the meaning of market supply. (All India 2013)

Ans. Quantities of a particular commodity offered for sale by all the firms at a given price in the market is known as market supply.

1. Give one reason for 'decrease' in supply of a commodity. (AH India 2013)

Ans. Rise in the price of substitute goods.

1. Give one reason for an 'increase' in supply of a commodity. (All India 2013)

Ans. Improvement in technology leading to a fall in the cost of production.

1. What is meant by increase in supply? (Delhi 2011)

Ans. When supply of a commodity increases due to factors other than price is called increase in supply. In this situation supply curve shifts rightward.

1. What is meant by decrease in supply? (All India 2011)

Ans. When supply of a commodity decreases due to factors other than price is called decrease in supply. In this situation supply curve shifts leftward.

6. Define supply. (All India 2009; Delhi 2009 C)

or Give meaning of supply. (Delhi 2006 C)

Ans. Supply refers to various quantities of a commodity that the producers willing to sell at different possible prices of the commodity at a particular point of time. C)

1. What causes a downward movement along a supply curve? (Delhi 2009, 2008)

Ans. Downward movement along a supply curve happens when own price of the commodity falls.

1. Give one reason for a rightward shift in supply curve. (All India 2009)

Ans. Rightward shift in supply curve occurs due to reduction in factor prices, causing a fall in cost of production.

1. When is the supply of a commodity called elastic? (Delhi 2008)

Ans. When percentage change in quantity supplied is more than percentage change in price, it is called elastic or more than unit elastic supply.

1. What does an upward movement along a supply curve indicate? (All India 2008)

Ans. An upward movement along a supply curve indicates rise in the price of the commodity.

1. When is the supply of a commodity said to be perfectly inelastic? (All India 2008)

Ans. Perfectly inelastic supply is a situation when quantity supplied remains constant, irrespective of change in price.

1. What is meant by inelastic supply of a commodity? (All India 2008)

Ans. When percentage change in quantity supplied is less than percentage change in price, it is called inelastic or less than unit elastic supply.

1. What is meant by perfectly elastic supply of a commodity? (Delhi 2008 C)

Ans. Supply of a commodity is said to be perfectly elastic, when its quantity supplied expands or contracts to any extent without any change or with very little change in price.

1. Price Elasticity of Supply of a good is 0.8. Is the supply elastic or inelastic?

Why? (All India 2006)

Ans. The supply is inelastic because Price Elasticity of Supply is less than one.

3 Marks Questions

1. Explain how technological progress is a determinant of supply of a good by a firm. (All India 2014)

or Explain the effect of technological progress on supply of a commodity .(Delhi 2009 C, 2008; All India 2008)

Ans. Technological improvement tends to lower the Marginal Cost and Average Costs of production because better technology facilitates higher output with the same inputs. Accordingly, producers are willing to supply more at the existing price.

As a result profit of producer increases, and supply curve will shift to the right from 55 to <math>5_15_1</math> and quantity increases from O Q to O <math>Q_v</math> with same level of price.