Answer to Question #195364 in Macroeconomics for Abdul basit

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

a) A supply schedule is a table of information that shows different quantities of goods at different prices available in the market.

At higher price a producer is ready to supply more goods whereas at lower price a producer likely to produce less of it.

Factors affecting the supply in the market.

Answer:

• Technical progress, it is the most important factor that determines the cost of production and the quality of goods to be produced.
• Factor prices, Any production process is a combined effort of land, labor, capital, and entrepreneur, their cost determine the cost of producing any good.
• Fiscal policy and monetary policy, these economic policy also influences the approach of business conditions, during prosperity the investments are high.

b) A perfectly inelastic demand (DD) curve is independent of the price. The same quantity is demanded at every price level.

The suppliers have not benefited from technological innovation despite the fact that technological innovation reduced their cost of production. But because of the inelasticity of DD, there was no rise in DD. The price received by the sellers has fallen and their profits have also fallen.