Economics Exercise Topic 3.

1. Explain the law of supply.

2. The supply equation for soy sauce of business A is expressed as Qs (in bottles per week) = 13000 + 7000 (p). For business B, the equation is Qs = 12000 + 7500 (p) and business C, Qs = 15000 + 9000 (p). Prepare a table to show how Qs changes (for individual business and in total) as prices rise from $2 to $3 to $4 to $5. Then draw the market supply curve for this product.

3. Explain the difference between an individual and a market supply curve.

4. Why are firms motivated to produce/supply more of the product when prices are higher?

5. What effect will each of the following factors have on the supply of hamburgers (show it on a graph): a) The cost of meat patty has increased. b) The selling price of kebab has gone up higher than hamburgers. c) Due to better technology, the machines can now produced more burgers per hour. d) Due to a recent recession, many hamburger joints have gone belly up. e) The government has levied an extra sales tax of 15% on every burger sold.

6. What causes the movement along the supply curve? What causes a shift in the supply curve?

7. What happens to the supply curve of Proton cars if the manufacturer is given a subsidy of $10000 for every car produced? Why?

8. If fruit sellers expect the price of apples to increase in the following week, what would happen to the supply curve of apples now? Why?

9. Business A, a toy manufacturer, currently produces 2 different toys i.e. Transformers action figures and Sesame Street soft toys. What would happen to the supply curve of Transformers action figures if there is a decrease in the selling price in Sesame Street soft toys? Why?

Answer

Economics Exercise on Production & Costs