Question

Please answer and give detail explanations

4. Which of the following is likely to result in a shift in the supply curve for sweaters?

a. An increase in consumer income

b. An increase in the price of wool

c. An increase in sweater prices

d. A sale on coats (coats are a substitute in consumption but not a substitute in production)

5. Which of the following results in a movement along supply curve of spinach but does not shift the supply curve for spinach?

a. Disastrous weather that destroys half of this year’s spinach crop

b. A rise in the price of spinach

c. An increase in wages for workers in spinach fields

d. A new way to farm spinach is discovered

6. Price floor, such as minimum wage

a. Always results in a surplus.

b. Always results in a shortage

c. Results in a surplus if the price floor is more than the equilibrium price

d. Results in a shortage if the price floor is less than the equilibrium price.

Answer 1

4) The supply curve will only shift when there is a change in the factors other than the price of the sweaters

an increase in the price of wool which is used in the production of sweaters will cause the costs of production to increase.

as cost of production increases, the supply decreases and shifts to the left.

option(B)

5) The movement along the supply curve is caused when there is a change in the price of the good, others things remaining constant as per the law of supply whereas a shift is caused due to change in factors other than the price.

so, when the price of spinach increases, the quantity supplied increases and there is an upward movement along the supply curve.

option(B)

6) The price floor is only binding when it is imposed above the equilibrium price.When it is imposed below the equilibrium price, it is not binding and there is no change in the equilibrium quantity or price

When the price is above equilibrium, producers would be willing to supply more whereas consumers demand would decreases so quantity supplied exceeds quantity demanded at the price above equilibrium in which case there would be a surplus.The minimum wage would cause the supply of labors to increase whereas the demand for labors by the firms decreases so there would be an excess supply of labors.

option(C)