The supply of a good declines (shifts left)

Economics Dec 13, 2020

The supply of a good declines (shifts left).

Will total revenue after the decline in supply be greater than, less than, or equal to total revenue before the decline in supply? Explain your answer.

Expert Solution

A decrease in supply will result in a leftward shift of the supply curve. This means that the price of commodities will rise and people won't be willing to purchase those goods or service. The equilibrium quantity will also decrease.

From profit maximization, we know that;

Revenue =price*quantity.

Thus with increased prices which discourage consumers and reduced supply will lead to decreased total revenue.

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote