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Antonio is skilled at making both earrings and bracelets
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
Expert Solution
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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