
Supply is one of the most important chapters in Microeconomics. Here are the supply class 11 important questions with answers.
Topics Discussed
One Mark Questions
1. Define supply.
Answer: Supply refers to the quantity of a commodity that a producer is willing and able to offer for sale at different prices during a given period.
2. What is the law of supply?
Answer: The law of supply states that, other things remaining constant, the quantity supplied of a commodity increases as its price increases and decreases when its price decreases.
3. What is the supply schedule?
Answer: A supply schedule is a tabular representation that shows the relationship between the price of a commodity and the quantity supplied.
4. What does a supply curve represent?
Answer: A supply curve represents the graphical relationship between the price of a commodity and its quantity supplied. It is usually upward-sloping.
5. What is individual supply?
Answer: Individual supply refers to the quantity of a commodity supplied by a single producer at different prices during a given period.
6. What is market supply?
Answer: Market supply is the total quantity of a commodity that all producers in a market are willing to offer for sale at different prices over a given period.
7. Name two factors that affect supply.
Answer: (i) Price of the commodity
(ii) Cost of production
8. What happens to the supply curve when there is technological progress?
Answer: The supply curve shifts rightward, indicating an increase in supply.
9. How does an increase in input prices affect supply?
Answer: An increase in input prices increases production costs, leading to a leftward shift in the supply curve (decrease in supply).
10. What is meant by a shift in the supply curve?
Answer: A shift in the supply curve occurs when supply changes due to factors other than the price of the good, such as technology, input costs, or government policies.
11. What is the difference between change in quantity supplied and change in supply?
Answer:
- Change in quantity supplied: Movement along the same supply curve due to a change in the good’s own price.
- Change in supply: A shift in the supply curve due to non-price factors.
12. What is price elasticity of supply?
Answer: Price elasticity of supply measures the responsiveness of the quantity supplied of a commodity to changes in its price.
13. What is the formula for price elasticity of supply?
Answer: PES=% Change in Quantity Supplied% Change in PricePES = \frac{\%\text{ Change in Quantity Supplied}}{\%\text{ Change in Price}}
14. What is perfectly elastic supply?
Answer: When PES = ∞, even a small price change leads to an infinite change in supply. The supply curve is horizontal.
15. What is perfectly inelastic supply?
Answer: When PES = 0, quantity supplied remains unchanged regardless of price changes. The supply curve is vertical.
16. How does government taxation affect supply?
Answer: Taxes increase production costs, leading to a decrease in supply and a leftward shift in the supply curve.
17. What is the short-run supply curve?
Answer: The short-run supply curve shows how supply responds to price changes when some inputs remain fixed.
18. How does the number of sellers affect market supply?
Answer: More sellers in the market increase total supply, shifting the supply curve rightward.
19. What is the relationship between time period and elasticity of supply?
Answer:
- Short-run: Supply is less elastic as firms cannot adjust production quickly.
- Long-run: Supply is more elastic as firms have time to expand capacity.
20. What happens to the supply of a commodity if its substitute’s price increases?
Answer: Producers may shift resources to produce the substitute, causing a decrease in supply of the original commodity.
Theory of Demand Class 11 Important Questions
3/4 Marks Questions
1. Define supply. Distinguish between supply and stock.
Supply refers to the quantity of a commodity that producers are willing and able to offer for sale at different prices over a given period of time.
Difference between Supply and Stock:
Basis | Supply | Stock |
---|---|---|
Meaning | The quantity of a commodity that producers are willing to sell at a given price in a given time period. | The total quantity of a commodity available with the producer, whether offered for sale or not. |
Dependence on Price | Directly influenced by the price of the commodity. | May not be influenced by price immediately. |
Change in Response to Price | Increases when price rises. | May not be immediately available for sale even if price rises. |
2. How is the supply of a commodity affected by changes in the prices of other commodities?
The supply of a commodity is influenced by the prices of other commodities because producers aim to maximize profits. If the price of a substitute good rises, producers may allocate more resources to producing that good instead, reducing the supply of the original commodity. Conversely, if the price of a complementary good increases, producers may increase the supply of the original commodity to meet demand.
For example:
- If the price of wheat rises, farmers may grow more wheat instead of rice, reducing the supply of rice.
- If the price of steel increases, car manufacturers may reduce car production, lowering car supply.
3. Explain any four determinants of the market supply of a commodity.
The market supply of a commodity depends on several factors. Four key determinants are:
- Price of the Commodity – A higher price leads to higher supply as producers are motivated by profit, and vice versa.
- Prices of Inputs (Cost of Production) – If input prices (e.g., labor, raw materials) rise, production costs increase, reducing supply. If input prices fall, supply increases.
- Technology – Improved technology increases efficiency and reduces production costs, leading to greater supply. Outdated technology may decrease supply.
- Government Policies (Taxes & Subsidies) – Higher taxes increase production costs, reducing supply, while subsidies lower costs and encourage higher supply.
4. Explain any two determinants of supply of a commodity.
Two major factors affecting the supply of a commodity are:
- Price of the Commodity – When the price of a good rises, producers supply more to earn higher profits, whereas a fall in price reduces supply.
- Technology – Advanced technology enhances production efficiency, reduces costs, and increases supply, while outdated methods lower supply.
5. Define market supply of a good. Give three causes of a rightward shift of the supply curve.
Market supply refers to the total quantity of a commodity that all producers in the market are willing to sell at different prices over a given period.
Causes of a Rightward Shift in the Supply Curve:
- Decrease in Input Costs – Lower production costs make it more profitable to produce goods, increasing supply.
- Technological Advancements – Improved technology enhances production efficiency, increasing supply.
- Government Subsidies – Financial support from the government reduces production costs, leading to increased supply.
6. What is meant by the supply function? Show its algebraic expression.
The supply function expresses the relationship between the quantity supplied of a commodity and its various determinants, such as price, input costs, technology, and government policies.
Algebraic Expression:
The general form of the supply function is: Sx=f(Px,C,T,G,N,F,O)S_x = f(P_x, C, T, G, N, F, O)
Where:
- SxS_x = Quantity supplied of commodity X
- PxP_x = Price of commodity X
- CC = Cost of production
- TT = Technology
- GG = Government policies (taxes, subsidies)
- NN = Number of sellers
- FF = Future price expectations
- OO = Other factors
In its simplest form, assuming price is the only factor affecting supply: Sx=a+bPxS_x = a + bP_x
Where aa is the minimum supply (even if price is zero) and bb is the responsiveness of supply to price changes.
7. Distinguish between individual supply curve and market supply curve.
Basis | Individual Supply Curve | Market Supply Curve |
---|---|---|
Meaning | Shows the relationship between price and quantity supplied by a single producer. | Shows the total quantity supplied by all producers in the market at different prices. |
Scope | Represents one firm’s supply behavior. | Represents the collective supply behavior of all firms. |
Derivation | Derived from the supply decisions of a single seller. | Derived by summing the individual supply curves of all sellers. |
Graph Shape | Upward-sloping for an individual producer. | Also upward-sloping but represents the aggregate of multiple producers. |
8. Explain the law of supply with the help of a supply schedule and supply curve.
Law of Supply:
The law of supply states that, other things remaining constant (ceteris paribus), the quantity supplied of a commodity increases as its price increases and decreases when its price decreases.
Supply Schedule:
Price (₹ per unit) | Quantity Supplied (Units) |
---|---|
10 | 50 |
20 | 100 |
30 | 150 |
40 | 200 |
Supply Curve:
- The supply curve is upward-sloping from left to right, showing a direct relationship between price and quantity supplied.
- As price rises, supply increases due to higher profit incentives for producers.
9. Distinguish between a change in supply and change in quantity supplied of a commodity.
Basis | Change in Supply | Change in Quantity Supplied |
---|---|---|
Meaning | A shift in the entire supply curve due to non-price factors. | A movement along the same supply curve due to a change in the commodity’s price. |
Cause | Caused by factors like technology, input costs, government policies, etc. | Caused only by a change in the commodity’s own price. |
Graphical Effect | Shifts the supply curve rightward (increase) or leftward (decrease). | Causes movement upward (expansion) or downward (contraction) along the same supply curve. |
10. What is meant by change in supply? State three factors that can cause a change in supply.
Change in supply refers to a shift of the entire supply curve due to changes in non-price factors affecting supply. It can be an increase in supply (rightward shift) or a decrease in supply (leftward shift).
Factors Causing a Change in Supply:
- Changes in Input Prices – If raw material or labor costs decrease, supply increases; if they increase, supply decreases.
- Technological Advancements – Improved technology increases production efficiency, shifting supply rightward.
- Government Policies – Subsidies increase supply (rightward shift), while higher taxes decrease supply (leftward shift).
11. Explain the effect of the following on the supply of a commodity:
(a) Fall in the Prices of Factor Inputs
Factor inputs include raw materials, labor, machinery, etc. When their prices decrease:
- The cost of production is reduced.
- Producers can produce more at the same cost, increasing supply.
- The supply curve shifts rightward, indicating an increase in supply.
Example: If the price of cotton falls, textile manufacturers can produce more garments at the same cost, leading to an increased supply of garments.
(b) Rise in the Prices of Other Commodities
When the price of other commodities (substitutes in production) rises:
- Producers may allocate more resources to producing those higher-priced goods, reducing the supply of the original commodity.
- This causes a leftward shift in the supply curve of the original good.
Example: If the price of wheat rises significantly, farmers may switch from growing rice to wheat, leading to a decrease in the supply of rice.
12. Explain the meaning of increase in supply and increase in quantity supplied with the help of a schedule.
Basis | Increase in Supply | Increase in Quantity Supplied |
---|---|---|
Meaning | A rightward shift of the entire supply curve due to non-price factors. | A movement along the supply curve due to an increase in the price of the commodity. |
Cause | Caused by changes in technology, input costs, government policies, etc. | Caused only by a rise in the price of the commodity itself. |
Graphical Effect | The entire supply curve shifts to the right. | Movement upward along the same supply curve. |
Supply Schedule for Increase in Supply vs. Increase in Quantity Supplied:
- Increase in Quantity Supplied (Due to Price Change)
Price (₹ per unit) | Quantity Supplied (Units) |
---|---|
10 | 50 |
20 | 100 |
30 | 150 |
- Here, as the price rises from ₹10 to ₹30, the quantity supplied increases, but the supply curve remains the same.
- Increase in Supply (Due to Non-Price Factors like Better Technology or Lower Input Costs)
Price (₹ per unit) | Old Supply (Units) | New Supply (Units) |
---|---|---|
10 | 50 | 80 |
20 | 100 | 140 |
30 | 150 | 200 |
- At the same prices, supply has increased, shifting the supply curve rightward.
13. Define market supply. What is the effect on the supply of a good when the government imposes a tax on the production of that good? Explain.
Definition of Market Supply:
Market supply refers to the total quantity of a commodity that all producers in a market are willing to offer for sale at different prices over a given period. It is the sum of individual supply from all firms in an industry.
Effect of Tax Imposition on Supply:
When the government imposes a tax on the production of a good (such as excise duty or sales tax):
- The cost of production increases for producers.
- Producers may reduce production to avoid higher costs.
- As a result, the supply curve shifts leftward, indicating a decrease in supply at the same price levels.
Example: If the government imposes a ₹10 per unit tax on cigarettes, manufacturers face higher production costs, leading to a decrease in the supply of cigarettes in the market.
14. Explain the effect of technical progress on the supply of a good.
Technological progress improves production efficiency and reduces costs. The effects on supply include:
- Lower Production Costs – Advanced machinery and automation reduce costs, making production more profitable.
- Increased Output – Improved technology allows firms to produce more goods using the same resources.
- Rightward Shift in the Supply Curve – As production becomes easier and cheaper, supply increases at all price levels.
Example: The introduction of modern irrigation systems in agriculture increases crop yield, leading to a higher supply of food grains in the market.
15. Explain the effect of a rise in input prices on the supply of a good.
Input prices include raw materials, labor, machinery, fuel, etc. When input prices rise:
- The cost of production increases, making it more expensive to produce the same quantity of goods.
- Producers may reduce output to avoid losses.
- The supply curve shifts leftward, indicating a decrease in supply at the same prices.
Example: If the price of steel increases, car manufacturers face higher production costs, leading to a reduced supply of cars in the market.
Consumer Equilibrium Class 11 Important Questions
6 Marks Questions
1. Explain the concept of supply schedule and supply curve with the help of a hypothetical schedule and diagram.
Supply Schedule:
A supply schedule is a tabular representation showing the relationship between the price of a commodity and the quantity supplied. It highlights how supply changes with changes in price.
Hypothetical Supply Schedule:
Price (₹ per unit) | Quantity Supplied (Units) |
---|---|
10 | 50 |
20 | 100 |
30 | 150 |
40 | 200 |
50 | 250 |
Supply Curve:
- A supply curve is a graphical representation of the supply schedule.
- It is upward sloping from left to right, indicating the direct relationship between price and quantity supplied.
Diagram:
(You can draw a graph with Price on the Y-axis and Quantity Supplied on the X-axis. The curve should be upward sloping.)
Conclusion:
- The supply schedule and supply curve both show that as the price increases, the quantity supplied increases.
- This supports the Law of Supply: “Other things remaining constant, the quantity supplied of a commodity increases when its price increases and decreases when its price decreases.”
2. State and explain the law of supply with the help of a hypothetical schedule and diagram.
Law of Supply:
The Law of Supply states that there is a direct relationship between the price of a commodity and its quantity supplied, keeping other factors constant (ceteris paribus).
Explanation:
- When the price rises, producers are willing to supply more to earn higher profits.
- When the price falls, producers supply less as profitability decreases.
- This relationship results in an upward-sloping supply curve.
Hypothetical Supply Schedule:
Price (₹ per unit) | Quantity Supplied (Units) |
---|---|
10 | 20 |
20 | 40 |
30 | 60 |
40 | 80 |
50 | 100 |
Diagram:
(Plot a graph with Price on the Y-axis and Quantity Supplied on the X-axis. Draw an upward-sloping curve representing the direct relationship.)
Exceptions to the Law of Supply:
- Perishable Goods – Farmers may sell perishable goods at lower prices rather than letting them go to waste.
- Agricultural Products – Supply is limited by natural factors like climate.
Conclusion: The law of supply explains the direct relationship between price and quantity supplied, which is depicted through the supply schedule and supply curve.
3. Explain the difference between movement and shift in the supply curve. Mention two reasons for the shift in the supply curve and one reason for movement along the supply curve.
Basis | Movement Along Supply Curve | Shift in Supply Curve |
---|---|---|
Meaning | Movement along the same supply curve due to a change in the commodity’s own price. | A shift of the entire supply curve due to factors other than price. |
Types | Expansion (when price rises) and contraction (when price falls). | Rightward shift (increase in supply) and leftward shift (decrease in supply). |
Cause | Change in the price of the commodity. | Change in factors like input costs, technology, and government policies. |
Graphical Effect | Upward or downward movement along the same curve. | Entire curve shifts left or right. |
Two Reasons for a Shift in the Supply Curve:
- Improved Technology – Advances in production methods lower costs and increase supply, shifting the curve rightward.
- Increase in Input Prices – If raw material costs rise, production becomes expensive, leading to a leftward shift in supply.
One Reason for Movement Along the Supply Curve:
- Change in the Price of the Commodity – When the price of the good rises, the quantity supplied increases (movement upward along the supply curve).
4. Define price elasticity of supply. What are the two main methods for measuring elasticity of supply? Discuss any one method.
Definition of Price Elasticity of Supply (PES):
Price elasticity of supply measures the responsiveness of quantity supplied to changes in the price of a commodity, keeping other factors constant. PES=% Change in Quantity Supplied% Change in PricePES = \frac{\%\text{ Change in Quantity Supplied}}{\%\text{ Change in Price}}
Two Main Methods for Measuring Elasticity of Supply:
- Percentage Method (Proportional Method)
- Geometric Method (Point Elasticity Method)
Explanation of Percentage Method:
This method calculates elasticity using the percentage change formula: PES=ΔQ/QΔP/PPES = \frac{\Delta Q / Q}{\Delta P / P}
Where:
- ΔQ\Delta Q = Change in quantity supplied
- ΔP\Delta P = Change in price
- QQ = Initial quantity supplied
- PP = Initial price
Example:
If the price of a product rises from ₹20 to ₹25 and its supply increases from 100 units to 150 units, PES=(150−100)/100(25−20)/20=50/1005/20=0.50.25=2PES = \frac{(150 – 100) / 100}{(25 – 20) / 20} = \frac{50/100}{5/20} = \frac{0.5}{0.25} = 2
Since PES>1PES > 1, supply is elastic.
5. Explain the factors which influence elasticity of supply.
The price elasticity of supply (PES) depends on several factors, including:
- Time Period:
- In the short run, supply is less elastic as firms cannot quickly adjust production.
- In the long run, supply is more elastic as firms can expand capacity.
- Availability of Inputs:
- If raw materials and labor are easily available, supply is elastic.
- If resources are scarce, supply is inelastic.
- Nature of the Commodity:
- Perishable goods (fruits, vegetables) have inelastic supply because they cannot be stored for long.
- Durable goods (cars, electronics) have elastic supply because they can be stored.
- Production Flexibility:
- If producers can easily switch production from one good to another, supply is elastic.
- If specialized machinery is needed, supply is inelastic.
- Stock Availability:
- If firms have large stockpiles, they can quickly increase supply, making it more elastic.
- If stock is limited, supply is less elastic.
- Government Policies:
- High taxes and regulations make supply less elastic.
- Subsidies and favorable policies make supply more elastic.
Conclusion
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