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Suppose there is a decrease in the price of wood
Suppose there is a decrease in the price of wood. We would expect the supply curve for pencils to
a. shift rightward.
b. remain unchanged as the price of pencils and the quantity supplied move down.
c. remained unchanged as the price of pencils and the quantity supplied move up.
d. shift leftward.
Expert Solution
- The correct answer is a. shift rightward.
Wood is a resource that is used to produce pencils. A change in the price of a resource or input will cause a shift in the supply curve of the product. According to this, if the price of wood decreased, the pencil producers will be able to produce more pencils at any given price. Therefore, the supply curve will shift to the right.
Note that options b. and c. are incorrect because the quantity supplied is only changed by a fluctuation in the price of the product. Option d. is also incorrect because a leftward shift would be caused by an increase in the price of inputs.
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