IAI Actuarial Core Principles · Business Economics · How competitive markets operate
Which one of the following would cause a movement along, rather than a shift of, the supply curve for two-wheelers in India?
A change in the good's own market price causes a movement along the existing supply curve. Cheaper steel, better technology, more manufacturers and subsidies each alter supply conditions at every price, so they shift the whole curve rather than moving along it.
- AA rise in the market price of two-wheelersCorrect
- BA fall in the price of steel used in production
- CA new technology that reduces assembly costs
- DAn increase in the number of manufacturers in the industry
- A government subsidy paid per vehicle produced
Explanation
Only a change in the good's own price moves quantity supplied along a given supply curve. Input prices, technology, the number of sellers and subsidies change the cost or ability to supply at each price, so they shift the curve.
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