Which one of the following would not shift the supply curve of good X to the right?
A) a fall in the price of the factors of production used in producing X
B) an improvement in technology used in the production of X
C) a rise in the price of X
D) an increase in the price of Y, a complement in production of X
E) a fall in the price of Y, a substitute in production of X
The correct answer and explanation is :
The correct answer is C) a rise in the price of X.
Explanation:
The supply curve represents the relationship between the price of a good and the quantity supplied by producers. A shift in the supply curve occurs when there are changes in factors other than the price of the good itself that affect the willingness or ability of producers to supply that good.
Let’s break down the options:
- A) A fall in the price of the factors of production used in producing X: A fall in the price of factors of production, such as labor, raw materials, or capital, lowers the cost of production. This enables producers to produce more of good X at the same price, thereby increasing the quantity supplied at each price level. This shift is to the right of the supply curve (increase in supply).
- B) An improvement in technology used in the production of X: Technological improvements typically make the production process more efficient, allowing producers to produce more with the same or fewer resources. This, too, leads to an increase in supply, shifting the supply curve to the right.
- C) A rise in the price of X: A rise in the price of X does not shift the supply curve. It represents a movement along the supply curve, as producers are willing to supply more of X at the higher price. The supply curve itself remains unchanged. Changes in the price of X affect the quantity supplied, but do not cause the supply curve to shift.
- D) An increase in the price of Y, a complement in production of X: When the price of Y, a complement in production to X, increases, producers are more likely to increase the production of X as well because producing more Y may make it more profitable to produce X (if the goods are jointly produced). This would shift the supply curve of X to the right.
- E) A fall in the price of Y, a substitute in production of X: When the price of a substitute in production (Y) falls, producers may switch to producing more of Y instead of X, since the opportunity cost of producing X becomes higher. As a result, the supply of X decreases, shifting the supply curve to the left. However, if we were to interpret this in the opposite way (a rise in the price of Y), it would likely shift the supply curve of X to the right, as producers would favor the production of more X.
Thus, the only option that does not shift the supply curve to the right is C, which only involves a movement along the curve rather than a shift.