CA Foundation · Business Economics · Theory of Demand and Supply
Which of the following is a determinant of the supply of a commodity that causes the whole supply curve to shift, rather than a movement along it?
A change in the cost of raw materials shifts the supply curve, because it changes the profitability of production at every price level. A change in the commodity's own price only moves the firm along the existing supply curve, and demand-side factors do not shift supply.
- AA change in the price of the commodity itself
- BA change in the cost of raw materials used to produce itCorrect
- CA change in the quantity demanded by consumers
- DA change in the consumers' income
Explanation
A change in the commodity's own price causes only a movement along the same supply curve (extension or contraction). A change in input costs alters the profitability of production at every price, so the supply curve itself shifts. Consumer income and quantity demanded are demand-side factors.
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