Q14 of 50 Page 1

Examine the effect of (a) fall in the own price of good X and (b) rise in the tax rate on good X, on the supply curve. Use diagrams.

A) Fall in the own price of good X:


● The effect of fall in the own price of Good X is mentioned below.


● The fall in the own price reduces the supply of good X.


● The producer moves along the same curve S from A to B.


● When the price falls from P1 to P2.


● The supply falls from Q1 TO Q2.



B) The rise in the tax rate on good X


● The effect of the rise in the tax rate on good X is mentioned below:


● The rise in the tax rate increases the cost of goods.


● The supply falls.


● The supply curve shifts from S1 to S.


● Price remains the same as OP.


● The quantity supplied falls from Q1 TO Q2.



More from this chapter

All 50 →
12

Why do the central problems of an economy arise? Explain the central problem of “for whom to produce”?

 13

Explain three properties of indifference curves.

 14

For blind candidates in lieu of Q. No 14.


Examine the effect of (a) fall in the own price of good X and (b) rise in the tax rate on good X on the supply of a good. Use schedule.

 15

Explain the implications of the following in a perfectly competitive market :

(a) A large number of sellers:


(b) Homogeneous products:


OR


Explain the implications of the following in an oligopoly market :


(a) Barriers to entry of new firms


(b) A few or a few big sellers