Skip to content

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

Wheat and mustard can both be grown on the same farmland in Haryana. If the market price of mustard rises sharply while the price of wheat stays unchanged, what is the likely effect on the supply of wheat?

The supply of wheat decreases, shifting its curve leftward. Wheat and mustard compete for the same land, so a rise in the mustard price makes mustard more profitable and farmers switch acreage to it. Wheat's own price is unchanged, so this is a shift, not a movement along the curve.

  1. ASupply of wheat decreases as farmers shift land to mustardCorrect
  2. BSupply of wheat increases as farmers copy the higher-priced crop
  3. CQuantity supplied of wheat extends along its supply curve
  4. DSupply of wheat is unaffected because its own price is unchanged

Explanation

Wheat and mustard are competing products in production, since they use the same land. A higher mustard price makes mustard more profitable, so farmers divert land away from wheat. The supply of wheat falls and its curve shifts left. It is not a movement along the curve, because wheat's own price did not change.

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