Multiple Choice
In a competitive market, how does an increase in the cost of a key input (e.g., wages or raw materials) affect the supply curve for a good, holding all else constant?
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3. The Market Forces of Supply and Demand
Shifts in the Supply Curve
Multiple Choice
Which of the following is a non-price determinant of supply (i.e., something that shifts the supply curve rather than causing movement along it)?
A
The quantity of the good produced
B
Input costs (e.g., wages or raw material prices)
C
The price of the good itself
D
The price consumers are willing to pay (demand)
Verified step by step guidance1
Understand the difference between a movement along the supply curve and a shift of the supply curve. A movement along the supply curve happens when the price of the good changes, affecting the quantity supplied.
Identify what causes a shift in the supply curve. These are factors other than the good's own price that affect the overall supply, such as input costs, technology, number of sellers, or government policies.
Analyze each option: 'The quantity of the good produced' is a result of supply decisions, not a determinant that shifts supply; 'The price of the good itself' causes movement along the supply curve, not a shift; 'The price consumers are willing to pay' relates to demand, not supply.
Recognize that 'Input costs (e.g., wages or raw material prices)' affect the cost of production. When input costs change, producers adjust their willingness and ability to supply at every price, causing the supply curve to shift.
Conclude that among the options, only input costs represent a non-price determinant of supply that shifts the supply curve rather than causing movement along it.
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