alleryWhen a fall in market price leads producers to offer less for sale, moving down along the same supply curve, this is best described as:
Aa decrease in supply
Ba contraction of supply
Ca leftward shift in supply
Da rise in producer surplus
Answer & Solution
Correct answer: B. a contraction of supply
1. The change is driven by the good's own price falling.
2. Own-price changes give a movement along the curve, not a shift.
3. A downward movement to less quantity is called a contraction.
4. A 'decrease in supply' or 'leftward shift' would need a non-price cause, so they are ruled out.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit III "Supply", p.4_
Keep practising Unit 2A: Demand, Supply and Market Equilibrium
Browse all Unit 2A: Demand, Supply and Market Equilibrium questions for CA Foundation, or explore more Economics topics.
Related questions
True or false: market equilibriumMatch each idea in price determinationSpot the supply lieMovement or shift of supply?Pick the supply moveHolding supply unchanged, an increase in the demand for a normal good will cause the equilFor the demand $Q_d = 60 - 10P$ and supply $Q_s = 5P - 15$, the equilibrium quantity tradeConsider a market with demand $Q_d = 60 - 10P$ and supply $Q_s = 5P - 15$. The equilibrium