Q.Write true or false: If there are losses of crops due to drought, the supply curve of an agricultural product will be downward sloping.

Any straight-line supply curve through the origin has elasticity of supply equal to 1 at every point — this is a general geometric result, independent of the line's slope.

For a straight-line supply curve passing through the origin, we can write Q = bP, where b is a positive constant (the slope of the line, Q/P). Price elasticity of supply is: es = (P/Q) × (dQ/dP).

Here, dQ/dP = b (the constant slope), and from the equation of the line, P/Q = 1/b. Substituting: es = (1/b) × b = 1.

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A perishable good's supply is typically price-INELASTIC (low, not high), since stock cannot be withheld or stored; a drought causes a leftward SHIFT of the supply curve, it does not turn the curve 'downward sloping'.

Main statement: 'A perishable good has a very high price elasticity of supply.' Supply elasticity measures how responsive the quantity supplied is to a change in price. For a perishable good, sellers cannot hold back stock in anticipation of a better price (it will spoil), nor can they quickly produce more in response to a sudden price rise (production of, say, fresh vegetables takes a full growing cycle). So however much the price changes, the quantity actually offered for sale in the short period barely changes — supply is largely fixed by what has already been harvested/produced, making elasticity of supply LOW, not high. The statement is therefore False.

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The law of supply describes a direct (positive) relationship between price and quantity supplied, which is graphically represented by an upward-sloping supply curve.

The law of supply says that, ceteris paribus (other determinants of supply -- input costs, technology, number of sellers, etc. -- held constant), sellers are willing to offer a larger quantity of a good for sale at a higher price than at a lower price, because a higher price makes production more profitable at the margin. Plotting price on the vertical axis and quantity supplied on the horizontal axis therefore gives a curve that rises from left to right, i.e. it slopes upward. A vertical curve would mean supply does not respond to price at all (perfectly inelastic su …

A rise in production cost (here, a rise in wages) is a change in a supply determinant other than price, so it shifts the entire supply curve leftward/upward, rather than causing a movement along it.

The supply curve shows the relationship between price and quantity supplied, holding all other determinants of supply (input costs, technology, number of sellers, taxes/subsidies, etc.) constant. A change in price alone causes a movement ALONG the existing supply curve. But a change in a non-price determinant -- such as an increase in production cost because wages rise -- changes how much firms are willing to supply at every given price, which SHIFTS the entire curve.

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Zero elasticity of supply (perfectly inelastic supply) is represented by a vertical supply curve.

Price elasticity of supply measures the percentage change in quantity supplied for a percentage change in price. When this value is zero, it means quantity supplied is completely unresponsive to price — no matter how high or low the price goes, the same quantity is offered for sale (typical of goods with a fixed/perishable stock, like a unique painting or the im …

False. Any straight-line supply curve through the origin has unitary (=1) elasticity at every point, never less than one.

For a linear supply curve passing through the origin, any point on the line can be written as price (P) and quantity (Q) that are in constant proportion to one another, i.e. P/Q is constant along the whole line. Price elasticity of supply is calculated as (dQ/dP) × (P/Q). Because the line passes through the origin, the ratio P/Q at any point always equals the inverse of the line's slope (dP/dQ), which exactly cancels with dQ/dP, giving elasticity = 1 everywhere on the line — regardless of how steep or flat the line is. (Only a l …

Perfectly elastic supply (elasticity = infinity) is drawn as a horizontal line, since sellers will supply any amount at exactly that one price.

Price elasticity of supply measures the responsiveness of quantity supplied to a change in price. When this elasticity is infinite, it means suppliers are willing to supply any quantity at the prevailing price, but none at all at a price even slightly lower, and the price itself never needs to rise regardless of how much is demanded. Graphically, this is represented by a horizontal stra …

Favourable weather raises farm output independent of price, so it shifts the whole supply curve rightward/downward rather than causing a mere movement along it.

The supply curve shows the quantity supplied at each possible price, holding constant all other factors that affect production, such as weather, input costs, and technology. A change in one of these other factors - here, more favourable weather improving crop yields - changes how much farmers are willing and able to supply AT EVERY price level, not just at the current price. This is represented as a shift of the entire supply curve, and since more is now supplied at each price (or equivalently the same quantity can now be supplied …

Perfectly inelastic supply is shown by a vertical supply curve, option (b).

Supply elasticity measures how much quantity supplied responds to a change in price. 'Perfectly inelastic supply' describes the extreme case where quantity supplied does NOT change AT ALL, no matter how much the price rises or falls - supply elasticity is exactly zero. Graphically, since quantity remains fixed at one value on the horizontal (quantity) axis for EVERY possible price on the vertical axis, the supply curve is a VERTICAL straight line at that fixed quantity. (A classic real-world example is the supply of a perishable agricultural product on a given day immediately after harvest - the quantity available that day is fixed, whatever price it fetches.) This is distinct from a h …

Drought causes a leftward SHIFT of the supply curve (a fall in supply), not a change in its slope to downward sloping - the statement is false.

It is important to distinguish between a 'change in (the slope of) the supply curve' and a 'shift of the supply curve'. The LAW OF SUPPLY states that, other things remaining the same, quantity supplied is directly (positively) related to price - represented by an UPWARD-SLOPING supply curve. A drought, by destroying part of the crop, is a change in a NON-PRICE determinant of supply (here, a natural/weather-related supply shock) - it reduces the quantity that can be offered for sale AT EVERY GIVEN PRICE, which is represented by the ENTIRE supply curve SHIFTING TO THE LEFT (a 'decrease in supply'). The new, shifted supply curve still retains its normal UPWARD-SLOPING shape - along this new curve, a higher price still induces a higher quantity supplied than a lower …

Equal percentage changes in quantity supplied and price mean price elasticity of supply equals 1.

Price elasticity of supply (Es) = percentage change in quantity supplied ÷ percentage change in price. If the percentage change in quantity supplied is EQUAL to the percentage change in price, then Es = (same number) / (same number) = 1. This is the case of unitary ela …

A rise in factor prices shifts supply leftward (decrease in supply); a proportionately smaller response of quantity supplied to price means supply is less than unit elastic.

Rising factor prices and the supply curve. If the prices of factors of production (labour, raw materials, capital, etc.) rise, the cost of producing the commodity rises at every level of output. This makes production less profitable at the existing price, so sellers are willing to supply LESS at each price than before — the entire supply curve shifts to the LEFT (a decrease in supply, as distinct from a movement along the curve).

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