Skip to content

CMA Foundation · Fundamentals of Business Economics and Management · Theory of Demand and Supply

A cycle manufacturer in Ludhiana finds that the price of cycles has risen from ₹4,000 to ₹4,400 and it now offers more cycles for sale, with no other factor changing. How is this response described in economics?

This is an extension of supply, shown as an upward movement along the same supply curve. The seller's own price rose while other determinants were unchanged, so only the quantity supplied changed. A curve shifts only when a non-price factor such as cost or technology changes.

  1. AExtension of supply, shown by an upward movement along the same supply curveCorrect
  2. BIncrease in supply, shown by a rightward shift of the supply curve
  3. CContraction of supply, shown by a downward movement along the same supply curve
  4. DDecrease in supply, shown by a leftward shift of the supply curve

Explanation

When the product's own price rises and all other determinants stay constant, the quantity supplied rises along the same curve. This is an extension of supply. A shift of the curve would need a change in a non-price factor such as input cost or technology, which has not occurred here.

Did you get it right without looking?

One question tells you little. A timed set on Theory of Demand and Supply shows your real accuracy, how long you take and where you lose marks.

Practise Theory of Demand and SupplyFree diagnostic mock

More Theory of Demand and Supply questions