Ecn 211 Lesson 3 Short Answer

1. Explain why an increase in quantity supplied is NOT the same as an increase in supply. Which of these would be associated with a rightward shift in the supply curve? Which would be associated with a movement up the supply curve? (5 Points)

--Answer below:

1. An increase in quantity supplied is a quantity associated with a single point on a supply schedule (or curve). This reflects the quantity that will be offered for sale at the prices set. An increase in supply happens when the entire supply curve shifts to the right. There is more quantity supplied at each particular price. That is the difference between quantity supplied and an increase in supply. As stated earlier, an increase in supply will cause the supply curve to shift to the right. A change in quantity supplied will cause movement within the supply curve.

.:2. Explain or interpret how demand represents marginal benefit and supply represents marginal cost. (5 Points)

--Answer below:

The demand curve shows a representation of the quantity that would be purchased at each various prices, ceteris paribus. This also shows the maximum amount that a consumer would pay for each quantity purchased. This maximum price is the consumer's marginal benefit, the incremental value of each additional item consumed. Supply on the other hand can be viewed in two ways. The supply curve, ceteris paribus, shows the quantity that is offered for sale at each various price. The supply curve also shows the minimum price that producers are willing to accept for each quantity offered. That minimum price is the producer's marginal cost, which is the incremental cost of producing each additional item offered

.:3. Consider the following scenarios and state the expected change in the supply or demand curve. You should note whether the scenario indicates a shift of the curve or movement along the curve. You are a supplier of widgets. The technology available to produce your product suddenly improves. (5 Points)

--Answer below:

When technology becomes a factor in the production of widgets the expected changes in the supply curve will be rightward. This happens because technology has improved the capability of widget production by lowering the cost of production. The lowered cost production will increase the supply availability. Any technology change in the production of goods will cause a rightward shift of the supply curve. Companies adopt these technological changes to be able to produce more output per unit of input, which is the same effect as a decrease in input prices.

.:4. Consider the following scenarios and state the expected change in the supply or demand curve. You should note whether the scenario indicates a shift of the curve or movement along the curve.