Supply Analysis
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quiz Questions
Q11
If the price of a good increases from ₹10 to ₹12, and the quantity supplied increases from 100 units to 130 units, what is the price elasticity of supply using the percentage method?
1.5
0.67
2.0
1.0
Explanation
Percentage change in quantity = 30%. Percentage change in price = 20%. Elasticity of Supply (Es) = 30% / 20% = 1.5.
Q12
Which of the following elements represents the minimum price a seller is willing to accept to produce and sell a specific unit of a good?
Marginal cost of production
Average fixed cost
Total revenue per unit
Accounting profit margin
Explanation
The supply curve reflects the marginal cost of production, which represents the minimum price acceptable to the supplier for each additional unit.
Q13
A straight-line supply curve that intercepts the price axis (Y-axis) above the origin possesses an elasticity that is:
Greater than one
Less than one
Equal to one
Equal to zero
Explanation
Any straight-line supply curve intersecting the Y-axis (price axis) has a price elasticity of supply greater than one (Es > 1).
Q14
A straight-line supply curve that intersects the quantity axis (X-axis) to the right of the origin exhibits an elasticity that is:
Less than one
Greater than one
Equal to one
Infinite
Explanation
Any straight-line supply curve intersecting the X-axis (quantity axis) has a price elasticity of supply less than one (Es < 1).
Q15
What term describes the situation where a rise in the price of a good leads to an increase in the quantity supplied, keeping other things constant?
Extension of supply
Increase in supply
Contraction of supply
Decrease in supply
Explanation
An increase in the quantity supplied due to an increase in the own price of the commodity is called an extension of supply.
Q16
If agricultural output drops due to severe weather conditions, the supply curve for crops shifts:
Leftward
Rightward
Downward
Nowhere, it only changes quantity supplied
Explanation
Adverse natural conditions reduce productivity, resulting in a decrease in supply and a leftward shift of the supply curve.
Q17
A horizontal supply curve parallel to the X-axis indicates that the price elasticity of supply is:
Infinite
Zero
One
Less than one
Explanation
A horizontal supply curve indicates perfectly elastic supply, where suppliers are willing to sell any quantity at a specific price, meaning elasticity is infinite.
Q18
If firms expect the market price of their product to fall drastically next month, their current supply will likely:
Increase, shifting the supply curve rightward
Decrease, shifting the supply curve leftward
Decrease, causing a upward movement along the curve
Remain completely unaffected
Explanation
Expectations of future price decreases prompt producers to sell off inventory now, increasing current market supply and shifting the curve rightward.
Q19
When the percentage change in quantity supplied equals the percentage change in price, supply is described as:
Unitary elastic
Perfectly elastic
Relatively inelastic
Perfectly inelastic
Explanation
Unitary elastic supply occurs when the ratio of percentage change in quantity to percentage change in price is exactly equal to 1.
Q20
Which of the following options represents a market-wide supply curve?
Horizontal summation of individual supply curves
Vertical summation of individual supply curves
Average of all individual supply curves
Product of all individual supply curves
Explanation
The market supply curve is derived by horizontal summation of individual supply curves of all firms producing that commodity in the market.