CMA Foundation · Fundamentals of Business Economics and Management · Theory of Demand and Supply
Which one of the following is a determinant that shifts the supply curve of a good, as opposed to one that causes only a movement along it?
A rise in the prices of inputs shifts the supply curve, because it changes production costs and hence the quantity offered at every price. Consumer income and tastes are demand-side factors, and a change in the good's own price only moves the seller along the existing supply curve.
- AA rise in the prices of inputs used to produce the goodCorrect
- BA rise in consumers' incomes
- CA change in consumers' tastes towards the good
- DA fall in the price of the good itself
Explanation
Input prices alter the cost of production and so change the quantity producers will offer at each price, shifting the supply curve. Consumer income and tastes affect demand. A change in the good's own price causes only a movement along the supply curve.
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