Question

1. If the price of disinfectant goes up from $4 to $10, what can be expected from companies that produce disinfectant?

2. Nell can produce toilet paper or hand sanitizer. If she produces toilet paper, she can make 70 cartons per day. If she makes hand sanitizer, she can make 35 cartons per day.

A. Draw her production possibilities graph (put toilet paper on the horizontal axis and sanitizer on the vertical axis).

B.What is her opportunity cost of making sanitizer (in terms of cartons of toilet paper)?

Answer 1

1. As a general rule of the relation between price of a product and its supply, they are directly related.

The law of supply states that other things constant, as price of a good increases, the quantity that the supplier offers will increase and vice versa.

It means that as the price of the disinfectant increases, the quantity supplied also increases.

So, as the price of disifectant rises from $4 to $10, the companies that produce disinfectant will produce more i.e, more supply. (Expansion in supply)

Refer to the diagram below: When price of the disinfectant is $4, quantity supplieD is Q1. And when price rises to $10, quantity supplied rises to Q2.