Other things remaining constant, the market supply for a good increases if:
- its price increases.
- price of its factors of production decreases.
- price of other goods decreases.
Select the correct answer using the code given below:
1 and 2 only
1 and 3 only
2 and 3 only
1, 2 and 3
Answer is Right!
Answer is Wrong!
This question was previously asked in
UPSC CDS-2 – 2023
1. Its price increases: An increase in the price of the good leads to an increase in the quantity supplied, causing a movement *along* the supply curve, not a shift of the entire curve.
2. Price of its factors of production decreases: Lower input costs reduce the cost of production, making the good more profitable to produce at any given price. This leads to an increase in supply, shifting the supply curve to the right.
3. Price of other goods decreases: Assuming these are substitute goods in production (producers can produce either Good A or Good B), a decrease in the price of Good B makes producing Good A relatively more profitable. Producers will shift resources towards producing Good A, increasing its supply (shifting the supply curve right).
Therefore, statements 2 and 3 describe factors that cause the market supply curve to shift to the right, indicating an increase in market supply.