{"id":17855,"date":"2019-12-07T16:46:50","date_gmt":"2019-12-07T11:16:50","guid":{"rendered":"https:\/\/www.cbselabs.com\/?p=17855"},"modified":"2021-09-18T15:15:33","modified_gmt":"2021-09-18T09:45:33","slug":"important-questions-for-class-12-economics-concept-of-supply-and-elasticity-of-supply","status":"publish","type":"post","link":"https:\/\/www.cbselabs.com\/important-questions-for-class-12-economics-concept-of-supply-and-elasticity-of-supply\/","title":{"rendered":"Important Questions for Class 12 Economics Concept of Supply and Elasticity of Supply"},"content":{"rendered":"
1.Supply<\/strong> It refers to various quantities of a commodity that the producers wish to sell at different possible prices of the commodity at a particular point of time.<\/p>\n 2.Quantity Supplied<\/strong> It refers to a specific quantity supplied at a particular price, during a time period.<\/p>\n 3.Individual Supply<\/strong> Supply of a particular commodity by an individual firm at a given price in the market is termed as individual supply.<\/p>\n 4.Market Supply<\/strong> Quantities of a particular commodity offered for sale by all the firms at a given price in the market is known as market supply.<\/p>\n 5.Factors Affecting Supply<\/strong><\/p>\n (i)Own price of a commodity (Px<\/sub>)<\/p>\n (ii)Price of related goods (Pr<\/sub>)<\/p>\n (iii) Number of firms in the industry (N f)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 .<\/p>\n (iv)Goal of the firm (G)<\/p>\n (v)Price of factors of production (Pf<\/sub>)<\/p>\n (vi)State of technology (T)<\/p>\n (vii) Business confidence or expectation (Ex<\/sub>)<\/p>\n (viii) Government policy (relating to taxation and subsidies) (Gp<\/sub>)<\/p>\n 6.Supply Schedule<\/strong> It is a table showing a relationship between price and quantity supplied of a commodity.<\/p>\n 7.Individual Supply Schedule<\/strong> It is a table showing different quantities of a commodity that an individual firm is ready to sell at different prices.<\/p>\n 8.Market Supply Schedule<\/strong> It is a table showing different quantities of a commodity that all the firms in a market are willing to sell at different prices of that commodity at a given time.<\/p>\n 9.Supply Curve<\/strong> It is a graphical presentation of supply schedule, showing positive relationship between price and quantity supplied of a commodity.<\/p>\n 10.Individual Supply Curve<\/strong> Graphical presentation of the relationship between price and \u00a0individual supply of a commodity is called individual supply curve<\/p>\n \u00a0<\/strong><\/p>\n 12.Supply Function<\/strong> Supply function studies the functional relationship between supply of a commodity and its various determinants.<\/p>\n It is expressed in the following equation:\u00a0Sx<\/sub> = F (Px<\/sub> ,Pr<\/sub>,N f<\/sub>,G,Pf,<\/sub>T,Ex<\/sub>,GP<\/sub>)<\/p>\n 13.Individual Supply Function<\/strong> It represents functional relationship between individual supply and factors affecting it.\u00a0Sx<\/sub> =<\/sup> F (Px<\/sub>, Pr<\/sub>, G,Pf<\/sub>,T, Ex<\/sub>,Gp<\/sub>)<\/p>\n 14.Law of Supply<\/strong> According to the law, keeping other factors constant, their exist a positive relation between price of the commodity and its quantity supplied, i.e. as price increases, supply also increases and vice-versa.<\/p>\n <\/p>\n 15.Movement Along a Supply Curve or Change in Quantity Supplied<\/strong> When supply of a commodity changes due to change in price and other factors are remaining constant. It is called change in quantity supplied.<\/p>\n 16.Extension of Supply<\/strong> It refers to expansion in quantity supplied in response to increase in own price of the commodity<\/p>\n <\/p>\n 17.Contraction of Supply<\/strong> It refers to contraction in quantity supplied in response to\u00a0decrease in own price the commodity<\/p>\n 18.Shift in Supply Curve or Change in Supply<\/strong> Shift in supply curve shows the situation of increase or decrease in supply, even own price of the commodity remains constant due to change in the factors.<\/p>\n 19.Increase in Supply<\/strong> When supply of a commodity increases due to factors other than price is known as increase in supply. In this situation, supply curve shifts rightward<\/p>\n <\/p>\n \u00a020.Causes for the Increase in Supply<\/strong><\/p>\n (i)Fall in the price of substitute goods.<\/p>\n (ii)Fall in the price of factors of production.<\/p>\n (iii) Improvements in technology.<\/p>\n (iv)Increase in the number of firms in the market.<\/p>\n (v) Reduction in factor price.<\/p>\n (vi) Decrease in taxation.<\/p>\n 21.Decrease in Supply<\/strong> When supply of a commodity decreases due to factors other than price is called decrease in supply. In this situation, supply curve shifts leftward.<\/p>\n <\/p>\n 22.Causes for the Decrease in Supply<\/strong><\/p>\n (i)Rise in the price of substitute goods.<\/p>\n (ii)Rise in the price of factors of production.<\/p>\n (iii)Outdated technology.<\/p>\n (iv)Decrease in the number of firms in the market.<\/p>\n (v)Increase in factor price.<\/p>\n (vi)Increase in taxation.<\/p>\n 23.Price Elasticity of Supply<\/strong> It is the responsiveness of quantity supplied due to change in price of own commodity. It is calculated as the percentage change in quantity supplied\u00a0caused \u00a0by a given percentage change in price of the commodity,<\/p>\n <\/p>\n <\/p>\n <\/p>\n 25.Perfectly Inelastic Supply<\/strong> (Es<\/sub> = 0) When quantity supplied does not change at all in response to change in price of the commodity, its supply said to be perfectly inelastic 26.Less than Unit Elastic<\/strong> (Es<\/sub> < 1) When percentage change in quantity supplied is less than the percentage change in price, supply is said to be less than unit elastic.<\/p>\n <\/p>\n <\/p>\n 27.Unit Elastic Supply<\/strong> (Es<\/sub> = 1) Supply of a commodity is said to be unit elastic, when percentage change in quantity supplied equal to percentage change in price.<\/p>\n <\/p>\n 28.More than Unit Elastic Supply<\/strong> (Es<\/sub> > 1) When percentage change in quantity supplied is more than percentage change in price, supply is said to be more than unit elastic.<\/p>\n <\/p>\n 29<\/strong><\/p>\n <\/p>\n 30.Factors Affecting Elasticity of Supply<\/strong><\/p>\n (i)Nature of inputs used<\/p>\n (ii)Risk taking by the producer<\/p>\n (iii)Nature of commodity<\/p>\n (iv)Time factor<\/p>\n (v) Technique of production<\/p>\n (vi) Cost of production<\/p>\n 31.Geometric Method of Measuring Price Elasticity of Supply<\/strong> Under this method, we can conceive following three possible situations of Elasticity of Supply.<\/p>\n <\/p>\n (i)Es<\/sub> = 1, when a straight line, positively sloped, supply curve starts from the origin \u2018O\u2019.<\/p>\n (ii)Es > 1, when a straight line positively sloped, supply curve starts from the Y-axis.<\/p>\n (iii)Es<\/sub> < 1, when a straight line positively sloped, supply curve starts from the X-axis.<\/p>\n 1.What is market supply of product? (All India 2014)<\/strong><\/p>\n \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 or<\/strong><\/p>\n Give the meaning of market supply. (All India 2013)<\/strong><\/p>\n Ans<\/strong>. Quantities of a particular commodity offered for sale by all the firms at a given price in the market is known as market supply.<\/p>\n 2.Give one reason for ‘decrease’ in supply of a commodity. (AH India 2013)<\/strong><\/p>\n Ans.<\/strong> Rise in the price of substitute goods.<\/p>\n 3.Give one reason for an ‘increase’ in supply of a commodity. (All India 2013)<\/strong><\/p>\n Ans.<\/strong> Improvement in technology leading to a fall in the cost of production.<\/p>\n \u00a04.What is meant by increase in supply? (Delhi 2011)<\/strong><\/p>\n Ans.<\/strong> When supply of a commodity increases due to factors other than price is called increase in supply. In\u00a0this situation supply curve shifts rightward.<\/p>\n 5.What is meant by decrease in supply? (All India 2011)<\/strong><\/p>\n Ans<\/strong>. When supply of a commodity decreases due to factors other than price is called decrease in supply. In this situation supply curve shifts leftward.<\/p>\n 6.Define supply. (All India 2009; Delhi 2009 C)<\/strong><\/p>\n \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0or<\/strong><\/p>\n Give meaning of supply. (Delhi 2006 C)<\/strong><\/p>\n Ans<\/strong>. Supply refers to various quantities of a commodity that the producers willing to sell at different possible prices of the commodity at a particular point of time.<\/p>\n 7.What causes a downward movement along a supply curve? (Delhi 2009,2008 C)<\/strong><\/p>\n Ans.<\/strong> Downward movement along a supply curve happens when own price of the commodity falls.<\/p>\n 8.Give one reason for a rightward shift in supply curve. (All India 2009)<\/strong><\/p>\n Ans<\/strong>. Rightward shift in supply curve occurs due to reduction in factor prices, causing a fall in cost of production.<\/p>\n 9.When is the supply of a commodity called elastic? (Delhi 2008)<\/strong><\/p>\n Ans<\/strong>. When percentage change in quantity supplied is more than percentage change in price, it is called elastic or more than unit elastic supply.<\/p>\n 10. What does an upward movement along a supply curve indicate? (All India 2008)<\/strong><\/p>\n Ans<\/strong>. An upward movement along a supply curve indicates rise in the price of the commodity.<\/p>\n 11.When is the supply of a commodity said to be perfectly inelastic? (All India 2008)<\/strong><\/p>\n Ans.<\/strong> Perfectly inelastic supply is a situation when quantity supplied remains constant, irrespective of change in price.<\/p>\n 12.What is meant by inelastic supply of a commodity? (All India 2008)<\/strong><\/p>\n Ans.<\/strong> When percentage change in quantity supplied is less than percentage change in price, it is called inelastic or less than unit elastic supply.<\/p>\n 13.What is meant by perfectly elastic supply of a commodity? (Delhi 2008 C)<\/strong><\/p>\n Ans<\/strong>. Supply of a commodity is said to be perfectly elastic, when its quantity supplied expands or contracts to any extent without any change or with very little change in price.<\/p>\n 14.Price Elasticity of Supply of a good is 0.8. Is the supply elastic or inelastic? Why?<\/strong><\/p>\n (All India 2006)<\/strong><\/p>\n Ans.<\/strong> The supply is inelastic because Price Elasticity of Supply is less than one.<\/p>\n 15.Explain how technological progress is a determinant of supply of a good by a firm.<\/strong><\/p>\n (All India 2014) \u00a0or<\/strong><\/p>\n Explain the effect of technological progress on supply of a commodity .(Delhi 2009 C, 2008; All India 2008)<\/strong><\/p>\n Ans<\/strong>. Technological improvement tends to lower the Marginal Cost and Average Costs of production because better technology facilitates higher output with the same inputs. Accordingly, producers are willing to supply more at the existing price.<\/p>\n As a result profit of producer increases, and supply curve will shift to the right from 55 to 51<\/sub>51<\/sub> and quantity increases from O Q to O Qv<\/sub> with same level of price.<\/p>\n <\/p>\n 16.Explain how input prices are a determinant of supply of a good by a firm.\u00a0(All India 2014)<\/strong><\/p>\n Ans<\/strong>. In case of increase in input price, Marginal Cost tends to rise. Accordingly, producers will supply less of the commodity at its existing price. This implies a backward shift in supply curve or decrease in supply<\/p>\n 17. A firm’s revenue rises from ? 400 to ? 500 when the price of its product rises from ? 20 to ? 25 per unit. Calculate the price elasticity of supply.(Delhi 2013)<\/strong><\/p>\n <\/p>\n 18.The Price Elasticity of Supply of a good is 0.8. Its price rises by 50%. Calculate the percentage increase in its supply.(Delhi 2013)<\/strong><\/p>\n Ans.<\/strong><\/p>\n <\/strong><\/p>\n Percentage change in quantity supplied = 0.8 x 50 19.The Price Elasticity of Supply of a commodity is 2.0. A firm supplies 200 units of it at a price of Rs 8 per unit. At what price will it supply 250 units. \u00a0(All India 2013)<\/strong><\/p>\n <\/p>\n 20.A 15% rise in the price of a commodity raises its supply from 300 units to 345 units. Calculate its Price Elasticity of Supply.(All India 2013)<\/strong><\/p>\n Ans.<\/strong><\/p>\n <\/p>\n 21.When the price of a good rises from ? 20 per unit to ? 30 per unit, the revenue of the firm producing this good rises from ? 100 to ? 300. Calculate Price Elasticity of Supply. \u00a0<\/strong>(All India 2013)<\/strong><\/p>\n <\/p>\n 22.A firm supplies 10 units of a good at a price of 15 per unit. Price Elasticity of Supply is 1.25. What quantity will the firm supply at a price of ? 7 per unit.(All India 2013)<\/strong><\/p>\n <\/p>\n 23.At a price of X 5 per unit of a commodity A, Total Revenue is ? 800. When its price rises by 20%, Total Revenue increases by ? 400. Calculate its Price Elasticity of Supply. (Delhi 2010)<\/strong><\/p>\n <\/p>\n 24.Price of commodity A is Rs 10 per unit and Total Revenue at this price is Rs 1600. When its price rises by 20%, Total Revenue increases by 1 Calculate its Price.(Delhi 2010)<\/strong><\/p>\n<\/div>\n <\/p>\n 25.Total Revenue at a price of Rs 4 per unit of a commodity is ?Rs 480. Total Revenue increases by Rs 240 when its price rises by 25%. Calculate its Price Elasticity of Supply\u00a0(Delhi 2010)<\/strong><\/p>\n <\/p>\n 26.Total Revenue is Rs 400 when the price of the commodity is Rs 2 per unit. When price rises to Rs 3 per unit, the quantity supplied is 300 units. Calculate the Price Elasticity Of (All India 2010)<\/strong><\/p>\n <\/p>\n 27.Explain any two causes of decrease in supply of a commodity.(Delhi 2010 C)<\/strong><\/p>\n Ans<\/strong>. Two causes of decrease in supply pf a commodity are:<\/p>\n (i) Increase in factors price Increase in price of factors of production will increase the cost of production due to which profit decreases. In this situation, supplier will stop producing this particular commodity and starts producing other commodity whose factor inputs are available at lower price. As a result, supply of this commodity decreases.<\/p>\n (ii) Increase in taxation Increase in taxes by government will also increase the cost of production due to which profit decreases. In this situation, supplier will stop producing this particular commodity and starts producing other commodity on which imposed taxes are not high. As a result, supply of \u00a0this commodity decreases.<\/p>\n 28.What is increase in supply? State any two factors that can cause it. (All India 2010 c)<\/strong><\/p>\n Ans<\/strong>.Increase in supply<\/strong>\u00a0When \u00a0supply of a commodity increases due to factors other than price is called increase in supply. In\u00a0this situation supply curve shifts rightward.<\/p>\n Two factors that causes increase in supply are:<\/p>\n (i) Reduction in factor price It will decrease the cost of production due to which profit increases. In this situation, the supplier will increase the supply of the commodity.<\/p>\n (ii) Decrease in taxation Decrease in taxes by government will also decrease the cost of production due to which profit increases. In this situation, the supplier will increase the supply of the commodity.<\/p>\n 29.Explain the effect of fall in prices of inputs on the supply of a good.(All India 2009,2008)<\/strong><\/p>\n Ans<\/strong>. In case of fall in input price, Marginal Cost will decline. Accordingly, producer will supply more of the commodity at its existing price. This implies a forward shift in supply curve or increase in supply, at same level of price.<\/p>\n 30.Explain the meaning of increase in supply and increase in quantity supplied with the help of a schedule. (Delhi 2009)<\/strong><\/p>\n Ans.<\/strong> When supply of a commodity increases due to factors other than price is called increase in supply. In\u00a0this situation supply curve shifts rightward.<\/p>\n <\/p>\n Increase in quantity supplied When supply of a commodity increases due to increase in price of a commodity and other factors are remaining constant, it is called increase in quantity supplied. In this situation, supply curve moves upward.<\/p>\n<\/div>\n <\/p>\n 31.Commodities X and Y have equal Price Elasticity of Supply. The supply of X rises from 400 units to 500 units due to a 20% rise in its price. Calculate the percentage fall in supply of Y if its price falls by 8%. \u00a0(Delhi 2009)<\/strong><\/p>\n <\/p>\n 32.A firm supplies 200 units of a good at a price of Rs 5 per unit. When price changes it supplies 100 units less. Price Elasticity of Supply is 2.5. Calculate price after change. (All India 2009)<\/strong><\/p>\n <\/p>\n 33.Explain the effect of rise in input prices on supply of a commodity.(Delhi 2009 c, 2008)<\/strong><\/p>\n Ans.<\/strong> In case of increase in output price, Marginal Cost tends to rise. Accordingly, producers will supply less of the commodity at its existing price. This implies a backward shift in supply curve or decrease in supply, quantity falls from O Q to O Qt with same price level.<\/p>\n <\/p>\n 34.Explain the geometric method of measuring Price Elasticity of Supply. (Delhi 2008 C)<\/strong><\/p>\n Ans.<\/strong> Geometrically, Elasticity of Supply depends on the origin of the supply curve. Assuming the supply curve to be a straight line and positively sloped.<\/p>\n We can have three possible situations of elasticity of supply as in the following diagrams:<\/p>\n <\/p>\n (ii)Es<\/sub> > 1, when a straight line, positively sloped supply curve starts from Y-axis.<\/p>\n
\n11.Market Supply Curve<\/strong> It is the graphical representation of market supply schedule. It is a horizontal summation of the individual supply curves.<\/p>\n
\n24.\u00a0Percentage Method of Measuring Price Elasticity of Supply<\/strong> According to this method, Elasticity of Supply is the ratio between \u2018percentage change in quantity supplied\u00a0<\/sup>and\u2018percentage in price of the commodity<\/p>\n
\n<\/p>\nPrevious Years\u00a0Examination Questions<\/strong><\/span><\/h3>\n
1 Mark Questions<\/strong><\/span><\/h3>\n
3 Marks Questions<\/strong><\/span><\/h3>\n
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\n<\/strong><\/p>\n
\nPercentage increase in supply = 40%<\/p>\n