Which one of the following will shift the supply curve of good X leftward?
A) a decrease in the wages of workers employed to produce X
B) an increase in the cost of machinery used to produce X
C) a technological improvement in the production of X
D) a situation where quantity demanded exceeds quantity supplied
E) a decrease in the cost of capital used to produce X
The correct answer and explanation is :
Correct Answer: B) an increase in the cost of machinery used to produce X
Explanation:
In economics, the supply curve represents the relationship between the price of a good and the quantity that producers are willing and able to supply, holding all other factors constant (ceteris paribus). A leftward shift of the supply curve indicates a decrease in supply at every price level, meaning producers are less willing or able to supply the good.
Let’s examine each option:
- A) a decrease in the wages of workers employed to produce X
This would reduce production costs, making it cheaper to produce good X. As a result, supply would increase, and the supply curve would shift rightward, not leftward. - B) an increase in the cost of machinery used to produce X
This directly increases production costs. When the inputs required for production become more expensive, firms are less likely to supply the same quantity at a given price. This leads to a leftward shift in the supply curve, indicating a decrease in supply. - C) a technological improvement in the production of X
Technological advancements generally make production more efficient, lowering costs and allowing firms to produce more. This causes the supply curve to shift rightward, representing an increase in supply. - D) a situation where quantity demanded exceeds quantity supplied
This describes a shortage, but it doesn’t shift the supply curve by itself. It might influence price, which would result in movement along the curve rather than a shift of the curve. - E) a decrease in the cost of capital used to produce X
Like lower wages or better technology, a reduction in capital cost lowers production expenses, encouraging increased supply. This would shift the supply curve rightward.
Thus, the only option that causes a leftward shift in the supply curve is B, due to increased production costs making it harder or less profitable to supply good X.