Multiple Choice
In a competitive market, how do changes in input costs 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 would cause a shift in the supply curve for a good (not a movement along the curve)?
A
A change in quantity supplied caused by a change in the good's price
B
An increase in the price of a key input used to produce the good
C
A decrease in the price of the good itself
D
An increase in consumer income (the good is normal)
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 occurs when the price of the good itself changes, affecting the quantity supplied.
Recognize that a shift in the supply curve happens when a non-price factor affecting supply changes. This means the entire supply curve moves either to the left (decrease in supply) or to the right (increase in supply).
Identify factors that cause shifts in supply, such as changes in input prices, technology, number of sellers, expectations, or government policies.
Analyze the options given: changes in the good's own price cause movements along the curve, not shifts; changes in consumer income affect demand, not supply; but an increase in the price of a key input raises production costs, causing the supply curve to shift left (a decrease in supply).
Conclude that the correct cause of a supply curve shift among the options is the increase in the price of a key input used to produce the good.
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