Multiple Choice
If a nonprice determinant of supply causes an increase in supply, what will happen to the supply curve?
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3. The Market Forces of Supply and Demand
Supply and Demand: Quantitative Analysis
Multiple Choice
An increase in the price of oranges would lead to which of the following effects in the market for oranges, assuming all other factors remain constant?
A
An increase in the quantity supplied of oranges
B
A decrease in the quantity demanded of oranges
C
A decrease in the supply of oranges
D
An increase in the demand for oranges
Verified step by step guidance1
Step 1: Understand the Law of Demand, which states that, ceteris paribus (all other factors held constant), an increase in the price of a good leads to a decrease in the quantity demanded of that good. This is because consumers tend to buy less of a good when its price rises.
Step 2: Recognize the difference between 'quantity demanded' and 'demand'. Quantity demanded refers to a movement along the demand curve caused by a change in price, while demand refers to a shift of the entire demand curve caused by factors other than price.
Step 3: Apply the Law of Supply, which states that an increase in the price of a good typically leads to an increase in the quantity supplied, as producers are willing to supply more at higher prices. However, this is about quantity supplied, not supply itself.
Step 4: Identify that a change in supply means the entire supply curve shifts due to factors like technology, input prices, or regulations, not due to a change in the good's own price.
Step 5: Conclude that an increase in the price of oranges will cause a decrease in the quantity demanded of oranges (movement along the demand curve), not a decrease in demand or supply, nor an increase in demand.
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