Answer to Question #194632 in Macroeconomics for hafsa

Question

Answer the following:

a). Discuss briefly the supply schedule and the various factors affecting the supply in the market.

b). Assume the demand being perfectly inelastic and supply suddenly doubles due to innovative technique of Illustrate in a well labelled graph, the changes in the equilibrium price, and quantity, and also is it advisable to do so from supplier point of view.

Answer 1

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[A]

A supply schedule is a table that shows the relationship between the price of a good and the quantity supplied. The graphical representation of the supplier's positive correlation between the price and quantity of a product or service is called a supply curve. As a consequence, the supply curve is skewed to the right. The number of individual supply curves within a market is known as market supply.

Factors affecting supply in the market include but are not limited to :

 Price- Price can be described as the amount a customer is willing to pay for a product or service. This is the most important element that determines a product's supply. According to the law of supply, as the price of a commodity rises, so does its supply, and vice versa.

Production costs-The availability of a commodity and the cost of production are completely contradictory. If the cost of production rises, businesses may reduce their commodity supply to save capital. For example, high labor wages, poor natural conditions, increases in the price of raw materials, taxes, and transportation costs.

The policies of governments-The government has a significant impact on product supply because of its role in regulating and protecting the industry. The lower the levy of tax, the more of the commodity is available. In the other hand, if stringent restrictions are enforced and an excise duty is imposed, the supply of the commodity will decrease.

Technology-Advances in technology reduce the cost of production. Technology advances can improve the production efficiency and therefore cut down the cost spent for production.

 

[B] When demand is perfectly inelastic the change in supply does not effect the equilibrium quantity. It only change the equilibrium price.

No.

It will not make economical sense to supply more whereas demand is inelastic .