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Change in Supply Practice

Use the chart below to help you determine the BEST answer to the given scenarios.

graph
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.
  • A to B
  • B to A
  • S1 to S2
  • S1 to S3
  1. The government increases the minimum wage. What will happen to the supply curve?
    1. A to B
    2. B to A
    3. S1 to S2
    4. S1 to S3

    Answer: d. S1 to S3. The supply curve shifts to the left, indicating a decrease in supply. Supply decreases as the cost of labor has increased for businesses.

  2. The cost of making toys has increased because the prices of red, yellow, blue, and green paint have increased. What will happen to the supply curve for toys?
    1. A to B
    2. B to A
    3. S1 to S2
    4. S1 to S3

    Answer: d. S1 to S3. 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. What will happen to the supply curve for toys?
    1. A to B
    2. B to A
    3. S1 to S2
    4. S1 to S3

    Answer: d. S1 to S3. 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. What will happen to the supply curve for toys?
    1. A to B
    2. B to A
    3. S1 to S2
    4. S1 to S3

    Answer: d. S1 to S3. The supply curve shifts to the left, indicating a decrease in supply.

  5. A new toy company begins selling toys. What will happen to the supply curve for toys?
    1. A to B
    2. B to A
    3. S1 to S2
    4. S1 to S3

    Answer: c. S1 to S2. The supply curve shifts to the right, indicating an increase in supply.

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