The Theory of Supply
Economics · 50 practice questions
Meaning and determinants of supply; supply schedules and curves; change in quantity supplied vs. change in supply; types of supply (joint/complementary, competitive, composite); elasticity of supply — determinants, measurement, nature and applications.
- Identify the factors determining supply.
- Interpret supply curves from supply schedules.
- Differentiate between a change in quantity supplied and a change in supply.
- Compare types of supply.
- Compute and interpret elasticity coefficients.
Try a few questions
- Practice question 1
Using the same schedule, between prices ₦8 and ₦12 (both a 50% change), the price elasticity of supply is
- A.1.0
- B.0.5
- C.2.0
- D.0
Show the answer
A. 1.0
%ΔQ/%ΔP = 50/50 = 1, unit elastic.
- Practice question 2
A rise in wages (a labour cost) would tend to shift a firm's supply curve
- A.rightward (an increase in supply)
- B.to become perfectly horizontal
- C.leftward (a decrease in supply)
- D.along itself without shifting
Show the answer
C. leftward (a decrease in supply)
Higher labour costs raise production costs, reducing supply at every price.
- Practice question 3
A rise in the price of diesel used to transport goods to market would tend to shift a firm's supply curve
- A.rightward (an increase in supply)
- B.to become perfectly vertical
- C.along itself without shifting
- D.leftward (a decrease in supply), since production costs rise
Show the answer
D. leftward (a decrease in supply), since production costs rise
Higher input costs reduce supply at every price.
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