ASSIGNMENT- 5

Q1. Multiple Choice Questions : Choose the Correct Answer

a. The entire schedule showing various quantities offered for sale at different
possible prices in the market of a commodity is called:
(a)Quantity Supplied (b)Market Supply
(c)Individual Supply (d)None of these

b. According to law of supply:

(a)there is positive relation between supply and price
(b)there is negative relation between supply and price
(c)there is constant relation between supply and price
(d)there is no relation between supply and price

c. Expansion/Extension of supply occurs due to change in:

(a)goal of the firm (b)own price of the commodity

(c)number of firms (d)technique of production

d. In case of contraction of supply, we move:

(a)to right on the another supply curve

(b)from lower point to upper point

(c)from upper point to lower point

(d)both (b) and (c)

e. Imposition of a unit tax, shifts the supply curve:

(a)to the right

 (b)to the left

(c)to the right as well as to the left

(d)None of these

f. Subsidy on the production of a commodity causes:

(a)increase in supply (b)decrease in supply

(c)no change in supply (d)both (a) and (b)

g. When supply curve is a vertical straight line, it indicates:

(a)unitary elastic supply (b)perfectly elastic supply

(c)perfectly inelastic supply (d)relatively elastic supply

h. When supply curve is parallel to X-axis, elasticity of supply is:

(a)zero (b)infinity (c)unity (d)negative

i. Supply is more elastic in case of:

(a)very short period (b)short period

(c)long period (d)both (b) and (c)

j. The supply of durable goods is usually:

(a)more elastic (b)less elastic

(c)perfectly elastic (d)perfectly inelastic

k. If 18% fall in price of the commodity causes 27% decrease in ita supply,
elasticity of supply will be:

(a)1.5 (b)0.5 (c)0.67 (d)2.5

l. if ES = 0.6, and the percentage change in price = 5, then percentage change in

quantity supplied is:

(a)8.33 (b)4.4 (c)5.6 (d) 3

Q2. Reason Based Questions

(i)Supply never changes unless price changes.

(ii)Increase in price leads to forward and shift in supply curve of a commodity.

(iii)Supply increases in response to increase in price of the concerned commodity.

(iv)If a straight line upward sloping supply curve shoots from the origin, elasticity
of supply is always equal to one.

(v)If elasticity of supply = 0, supply curve becomes a horizontal straight line.

(vi)At a point of intersection of two supply curves, flatter curve shows higher
elasticity of supply.

(vii)In the long period, elasticity of supply tends to be lower than in the short
period.

Q3.What causes a movement along a supply curve of a good?

Q4.If there is change in any other determinant of supply (other than own price of
the concerned commodity), the supply curve must shift to the right to the left. Do
you agree? Give reason.

Q5.Supply is more responsive to price in the long period compared to short

period. Comment.

Q6. The price elasticity of supply is 4. When its price falls from 10 and 8 per
unit, its quantity supplied falls by 400 units. Calculate the new quantity at the
reduced price.

Q7. The quantity supplied of a commodity at a price of 8 per unit is 50 units. Its
price elasticity of supply is 1.6. Calculate the price at which its quantity supplied
wil be 35 units.

Q8.Price elasticity of Good-X is one and a half times the price elasticity of Good-Y.
SX rises from 125 units to 175 units due to a 16 percent rise in PX. Calculate the
percentage fall in SY if PY reduces from 10 to 7.

Q9. The following headline appeared in the Economic Times:

Import duty on crude and refined edible oil up by 5 %.

Use a diagram and economic theory to analyse the impact of the statement on
the supply of crude and refined edible oil in the domestic market.

Q10. Explain the distinction between change in quantity supplied and change
in supply. Use diagram.

AMIT ARORA