Change in Supply II

Use the chart below to help you determine the BEST answer to the given scenarios. When reading each scenario you should consider the item in parenthesis to determine the best answer.

 

This is a supply curve showing shifts in supply. Remember, supply curves go up from left to right and represent the increase in supply as prices increase. S1 is the original supply line. It contains two points - A, which represents a lower price and lower supply and B, which represents higher price and higher supply. Line S2 shows an increase in supply- in other words, a higher quantity supplied for a given price. This line is to the right of S1. Line S3 represents a decrease in supply or a lower quantity supplied for a given price. It is to the left of line S1.

 

Possible Answers:

  1. A to B
  2. B to A
  3. S1 to S2
  4. S1 to S3

 

  1. The government increases the minimum wage. (Supply of most things)
    a. the quantity supplied increases
    b. the quantity supplied decreases
    c. the supply curve shifts to the right, indicating an increase in supply
    d. the supply curve shifts to the left, indicating a decrease in supply
    ANSWER: A. the quantity supplied increases

  2. The cost of toys increase. (Toys)
    a. the quantity supplied increases
    b. the quantity supplied decreases
    c. the supply curve shifts to the right, indicating an increase in supply
    d. the supply curve shifts to the left, indicating a decrease in supply
    ANSWER: D. the supply curve shifts to the left, indicating a decrease in supply

  3. The government places a plastic tax on all companies who use plastic. (Toys)
    a. the quantity supplied increases
    b. the quantity supplied decreases
    c. the supply curve shifts to the right, indicating an increase in supply
    d. the supply curve shifts to the left, indicating a decrease in supply
    ANSWER: D. the supply curve shifts to the left, indicating a decrease in supply

  4. Mattel expects the prices of toys to fall in the near future. (Toys)
    a. the quantity supplied increases
    b. the quantity supplied decreases
    c. the supply curve shifts to the right, indicating an increase in supply
    d. the supply curve shifts to the left, indicating a decrease in supply
    ANSWER: D. the supply curve shifts to the left, indicating a decrease in supply

  5. A new toy company begins selling toys. (Toys)
    a. the quantity supplied increases
    b. the quantity supplied decreases
    c. the supply curve shifts to the right, indicating an increase in supply
    d. the supply curve shifts to the left, indicating a decrease in supply
    ANSWER: B. the quantity supplied decreases