An increase in supply is shown by
A) a movement down along the supply curve.
B) a movement up along the supply curve.
C) a rightward shift of the supply curve.
D) a leftward shift of the supply curve.
E) an initial movement up and then down along the same supply curve.
The correct answer and explanation is :
The correct answer is C) a rightward shift of the supply curve.
Explanation:
In economics, the supply curve represents the relationship between the price of a good and the quantity of that good that producers are willing to offer for sale, all other factors being constant. When we talk about an increase in supply, we are referring to the ability and willingness of producers to offer more of a good or service at each price level.
An increase in supply is not indicated by movements along the supply curve, but rather by a shift of the curve itself. Specifically, an increase in supply causes the supply curve to shift to the right. This shift reflects that at every price point, producers are willing and able to produce and sell more of the good than they were before.
Let’s break down why the other options are incorrect:
- A) a movement down along the supply curve: A downward movement along the supply curve represents a decrease in price and an increase in quantity supplied, which is called an expansion in supply. However, this does not reflect a shift in the curve, but rather a movement along it due to a change in price.
- B) a movement up along the supply curve: This is a contraction in supply where an increase in price leads to a decrease in the quantity supplied. Again, this is a movement along the curve rather than a shift in supply.
- D) a leftward shift of the supply curve: A leftward shift would represent a decrease in supply, where producers are willing to produce less of the good at every price level, typically due to factors like higher production costs, adverse weather, or the exit of producers from the market.
- E) an initial movement up and then down along the same supply curve: This combination does not accurately represent a shift in supply. Movements along the supply curve are typically driven by changes in price, but a shift in supply is driven by changes in factors other than the price, such as technology, input prices, or regulations.
Thus, an increase in supply is shown by a rightward shift of the supply curve (Option C), indicating that at any given price, more of the good or service is available to consumers.