ICSE BoardEnglish MediumSTD 10EconomicsTheory of Supply4 Marks
Question
With the help of a diagram explain the meaning of increase in supply and decrease in supply.
✓
Answer
(a) When supply of a commodity rises due to factors other than price of the commodity, it is called increase in supply. This is shown in the diagram. In the figure, SS is the original supply curve. At price OP, the quantity supplied is OQ. Now when supply increases, supply curve shifts, to the right as $S_1 S_1$. Producers are now willing to supply more, i.e., $O Q_1$ at the same price of OP. (b) Causes of Decrease in Supply: Decrease in supply may be caused by any of the following reasons: (1) Rise in input prices resulting in an increase in cost of production (ii) Rise in prices of other goods making their production more profitable. It becomes less profitable to produce the given commodity (iii) Technology becoming outdated causing increase in cost of production and hence decrease in supply.
Need a full question paper?
Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.