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Antonio is skilled at making both earrings and bracelets

Economics

Antonio is skilled at making both earrings and bracelets. Antonio has no preference between making earrings or bracelets since he earns the same amount from the two activities. If the selling price of bracelets decreases from $40 to $20, then Antonio's opportunity cost of making earrings decreases, and making earrings is now more profitable than making bracelets. Suppose that the earrings market consists of several suppliers like Antonio who are skilled at making both earrings and bracelets. Which of the following is likely to happen to the supply curve of earrings when the price of a bracelets decreases?

It shifts to the right

It shifts to the left

It does not change

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Antonio is skilled at making both earrings and bracelets. Antonio has no preference between making earrings or bracelets since he earns the same amount from the two activities. If the selling price of bracelets decreases from $40 to $20, then Antonio's opportunity cost of making earrings decreases, and making earrings is now more profitable than making bracelets. Suppose that the earrings market consists of several suppliers like Antonio who are skilled at making both earrings and bracelets. The following is likely to happen to the supply curve of earrings when the price of a bracelets decreases -

  • It shifts to the right

When price of bracelet decreases, seller like Antonio start producing more of earnings. This would increase the supply of earrings. When supply of a good increases, the supply curve shifts to right side.

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