Unit 1 · Basic Economic Concepts

1.5 Practice Supply

Guiding question

Given a new scenario, can you correctly tell a movement along the supply curve apart from a shift of it — and identify the shift's direction?

How the real paper is built

The ministry sets half multiple choice and half written answer in every subject. The two halves are not the same skill. In the multiple-choice half you have to spot the wrong options quickly — and the wrong options are built out of the mistakes students really make. In the written half nobody gives you the answer to recognise; you have to produce it, in your own words, with a reason.

Practise both. Being good at one half and weak at the other costs you exactly half the paper.

The price of lumber rises, and sawmills sell more lumber at the new, higher price. This is best described as —

A farmer can grow either wheat or corn on the same land. If the price of corn rises significantly, what happens in the market for wheat?

Which of the following would cause an increase in supply (a rightward shift) for a manufactured good?

Producers currently expect the price of a good to rise sharply next month. What is the most likely effect on the CURRENT supply curve for that good?

Level 1 · say what it is

1(a)

State the law of supply, and identify what type of graphical change (a movement along the curve, or a shift of the curve) results from a change in the good's own price.

[2 marks]

Level 2 · explain why

1(b)

Draw a correctly labeled supply curve for wheat. On your graph, show and label the effect of EACH of the following two events, treating them as two separate scenarios: (i) the price of wheat rises, and (ii) a drought destroys farmland, raising the cost of growing wheat. For each, state whether it is a movement along the curve or a shift, and in which direction.

[4 marks]

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