121 + Interview Questions in SUPPLY IN GENERAL AWARENESS Page 1 InterviewSolution

1.	The supply curve of a good shifts to the right when prices of other goods rise.
Answer» False: When price of other goods rise, it becomes more profitable to produce them in place of the given good, so supply curve will shift to left.

Discussion

2.	In case of __ supply falls at the same price.A. decrease in supplyB. contraction in supply.C. increase in supplyD. expansion in supply
Answer» Correct Answer - A when there is a decrease in supply due to any factor, supply falls at the same price.

Discussion

3.	Which of the following falls in the category of goods that do not follow the law of supply?(A) Rare goods(B) Precious goods(C) Perishable goods(D) Both (A) and (C)
Answer» Correct option is (D) Both (A) and (C)

Discussion

4.	If nothing is supplied event at a marginally reduced price, what will be the elasticity of supply ?
Answer» Perfectly Elacstic Supply `(E_(s) = oo)`.

Discussion

5.	There are three different supply curves passing through the origin. Curve A makes an angle of `60^(@)` Curve B makes an angle of `45^(@)` and curve C makes an angle of 30°. What will be the price elasticily of curves A, B and C?
Answer» All the three curves: A, B and C will have unitary elastic supply as they all are passing through the origin.

Discussion

6.	How does an increase in the price of the an input of affect the supply curve of firm ?
Answer» It will lead to a leftward shift in supply curve as producin that good is expensive now due to increase in its cost.

Discussion

7.	How does an icreasae in the price of an input affect the market supply curve ?
Answer» If the cost of resources used to produce the good increases, sellers will be less inclined to supply the same quantity with the given price, and the market supply curve shift to the left.

Discussion

8.	The following supply curves shits from SS to `S_(1)S_(1)` due to: A. Decrease in TaxesB. Upgradation of techologyC. Fall in the price of inputsD. All of the above
Answer» Correct Answer - D all of the above situation leads to increase in supply and hence a rightward shift in supply curve.

Discussion

9.

Distinguish : Stock and Supply.

Answer»

Point	Stock	Supply
Meaning	Stock refers to entire quantity of a commodity which is in the custody of the seller. So it is the potential supply.	Supply refers to the quantity of a commodity offered for sale at a given price and at a given time and place.
Dependence	Stock depends on production.	Supply depends on stock and price and Willingness
Relationship	Stock can be greater than the supply.	Supply cannot be greater than the stock. Supply can be either equal or less than the stock.
Order of existence	Stock comes before supply	Supply follow stock. There cannot be supply without stock.

Discussion

10.	Why is the law of supply not applicable to rare articles?
Answer» Rare articles do not have any current production. Hence…..

Discussion

11.	How does the imposition of a unit tax affects the supply curve of a firm ?
Answer» The supply curve will shift to the left as the imposition of tax on the good will reduce its profit margin due to the increase in its cost.

Discussion

12.	Howe dose technological progress affect the supply curve of a frim ?
Answer» Supply curve will shift to the right due to technological progress as it will lead to the reduction in per unit cost of the commodity and hence increases its profit margin.

Discussion

13.	Which one of the following is the result of increase in price of factors of production ?A. Price of the commodityB. Period of timeC. Willingess to buyD. Quantity of the commodity
Answer» Correct Answer - C when there is more willingness to buy , prices of factors of production increase. correct answer is option (C).

Discussion

14.	Which of the following varies in the law of supply?(A) Competition(B) Natural factors(C) Number of sellers(D) None of these
Answer» Correct option is (D) None of these

Discussion

15.	Changes in cost of factors of production affect supply. Give reason.
Answer» Land, labour, capital and entrepreneur are the four factors of production. When rent paid to the owner of land or wages paid to the labourer, decrease, the cost of production decreases. When cost of production decreases and if price remains unchanged, the profits increase. Hence, the seller is more willing to sell large quantity. Thus, supply expands when prices of factors of production fall. On the contrary, if cost of production rises, the situation becomes opposite and the supply contracts.

Discussion

16.	Suppose there are two producers in the producrs in the market for a commodity and their supply functions are follows: `Q_(1)` = - 30 + 3p for any price more than or equal to 10 and `Q_(1)` = 0 at any price less than 10. `Q_(2)` = - 20 +2p for any price more than or equal to 10, and `Q_(2) = 0` at any price less than 10. Find out the market supply function .
Answer» From the given supply functions, it can be seen that both the producers do not want to supply the commodity for any price less than ₹10. Hence, the market supply will be: `Q_("Market ") = Q_(1)+ Q_(2)` `Q_("Market")` =(-30 + 3p) + (-20 +2p) `Q_("Market") = - 50 + 5p ` for any price more than or equal to 10 and `Q_("Market")` = 0 at any price less than 10. Practicals on Elasticity of supply Formula of Elasticity of Supply Elasticity of Supply `(E_(s)) = ("Perecentage Change in Quantity Supplied")/(" Perecntage Change in Price")` Elasticity of Supply `(E_(s)) = (Delta Q)/(DeltaP) xx (P)/(Q) " "OR" " (1)/("Solpe of Supply Curve")xx(P)/(Q)`

Discussion

17.	Which of the following is not an assumption of the law of supply?(A) Technological changes are inevitable(B) Level of competition remains the same(C) Expectations regarding future prices are ignored(D) Government policy is constant
Answer» Correct option is (A) Technological changes are inevitable

Discussion

18.	Which of the following is not a essential element of supply ?A. highly elasticB. Unitary elasticC. Perfectly inelasticD. Less elastic
Answer» Correct Answer - B correct answer is (B). because it is just an imaginary situation when the change in quantity supplied is exactly equal to change in the price (unitary elastic).

Discussion

19.	In the long period , the supply for a commodity is :A. Perfectly InelasticB. Less ElasticC. Highly ElasticD. Perfectly Elacstic
Answer» Correct Answer - C In long run, supply of a good is highly elastic as quantity supplied is more responsive to the change in price. So, correct option is (C).

Discussion

20.	The following supply schedule is unitary elastic.
Answer» True. It is a cse of the elastic supply because percentage change in quantity supplied is equal to perecentage change in price throught the schedule.

Discussion

21.	Stock is always ________ than supply.(A) Higher(B) Lower(C) Not higher(D) Negligible
Answer» Correct option is (A) Higher

Discussion

22.	Which are the two matters on, which law of supply is presented?
Answer» On price and factors other than price.

Discussion

23.	Define supply.
Answer» The quantity of production which a producer is able and willing to sell in the market at a given price and at a particular point of time is called supply.

Discussion

24.	How is the slope of supply curve?
Answer» Positive slope.

Discussion

25.	What are the changes that take place in supply due to change in factors other than price?(A) Increase(B) Expansion(C) Expansion-contraction(D) Increase-decrease
Answer» Correct option is (C) Expansion-contraction

Discussion

26.

Differentiate between expansion-contraction of supply and increase-decrease of supply.

Answer»

Expansion contraction of supply	Increase decrease of supply
1. When factors other than price are assumed to remain constant and price varies, there occurs expansion and contraction of supply.	1. Assuming price as constant if the suppiy increase/decrease due to some other factors, it is known as increase/ decrease in supply.
2. Expansion contraction occurs due to price.	2. Increase decrease of supply takes place due to factors other than price.
3. Here, the supply curve remains stable, only the points on the supply curve change.	3. Here, the entire supply curve shifts.

Discussion

27.	Indicate whether the following will lead to expansion, contraction, increase or decrease in supply. (i) Installation of a new machine, resulting in fall in cost of production. (ii) An increase in the price of the given commodity. (iii) An increase in wages of the employees leading to rise in cost of production. (iv) A firm deciding to maximise sales instead of profits. (v) Imposition of tax on the production of a commodity. (vi) A fall in price of a commodity whose supply curve is being considered. (vii) An increase in the prices of other commodities.
Answer» Expansion in supply: (i), Contraction in supply: (vi), Increase in supply: (i), (iv): Decrease in supply (iii), (v), (vii)

Discussion

28.	How few countries expand their supply using advanced technology?
Answer» Few countries with the help of advanced technology are able to produce better quality goods at much faster rate with same or lower costs. This way …..

Discussion

29.	The given supply schedule represents__. A. Expansion is SupplyB. Increase in supplyC. Constractin in SupplyD. Decrease is supply
Answer» Correct Answer - B

Discussion

30.	What decreases, therefore profit decreases and due to that supply decreases?(A) Stock(B) Supply(C) Price(D) Price elasticity of demand
Answer» Correct option is (C) Price

Discussion

31.	What is the relationship between price and supply of commodity?(A) Direct(B) Opposite(C) Equal(D) Zero
Answer» Correct option is (A) Direct

Discussion

32.	Into how many major categories can we classify determinants of supply?(A) 2(B) 3(C) 4(D) 5
Answer» Correct option is (A) 2

Discussion

33.	When other factors are assumed constant and price varies, of supply takes place.(A) Increase(B) Expansion and contraction(C) Decrease(D) All of these
Answer» Correct option is (B) Expansion and contraction

Discussion

34.	What is market supply?
Answer» The sum total of all individual supplies -of all existing sellers in the market at a given price at a particular point of time is called market supply.

Discussion

35.	Change in the pirce of the given commodity will lead to :A. Expansion is SupplyB. conrtaction in supplyC. either (a) or (b)D. Neither (a) and (b)
Answer» Correct Answer - C Increase in price will lead to increase in the supply and hence expansion in supply , and decrease in price will lead to fall in supply and hence contraction in supply.our correct answer is option is (c).

Discussion

36.	Individual supply curve is ________ whereas market supply curve is(A) Positive; Negative(B) Negative; Negative(C) Negative; Positive(D) Positive; Positive
Answer» Correct option is (D) Positive; Positive

Discussion

37.	A straight-line supply curve cuts X-axis in its positive range. What can you say about the elasticity of supply ? OR What is the price elasticity of supply of a straight line supply curve touching the OX-axis?
Answer» Less elastic `(Es lt 1)`. because it implies quantity supplied is less responsive to the change in price.

Discussion

38.	Explain briefly how does change in supply takes place.
Answer» The determinants of supply are classified under two major categories. They are: Price and Factors other than price. When factors other than price are assumed to remain constant and price varies, there occurs expansion and contraction of supply. When price is held constant and other factors vary, there occurs increase and decrease in supply.

Discussion

39.	Explain the exceptions to the law of supply.
Answer» “When all other factors affecting supply are assumed to be constant, as price increases, supply expands and as price decreases, supply contracts”. However, for some goods there are exceptions to this law. Under the exceptions to law of supply, keeping other factors constant, supply of a good rises when its price falls and supply falls when price rises. Examples of such goods are: 1. Rare goods: Certain goods are rare and hence even if there is a significant rise in their prices, their supply does not rise. For example, ancient coins, ancient idols, original manuscripts, old books, ancient handicrafts etc. An important point to note is that such goods are not produced on a daily basis. Hence,-it will be incorrect to consider these goods as exceptions to the law of supply. So, such goods should be kept out of the study of supply. 2. Perishable goods: Highly perishable goods like milk, milk products, green vegetables, meat, eggs, fish, ripe fruits, flowers, etc. cannot be stored for a long time. Hence, even if their price falls their supply will not contract because they cannot be preserved and hence must be sold. In current times with availability of storing such goods in cold storages even this exception is a matter of debate.

39.

Explain the exceptions to the law of supply.

Answer»

“When all other factors affecting supply are assumed to be constant, as price increases, supply expands and as price decreases, supply contracts”. However, for some goods there are exceptions to this law.
Under the exceptions to law of supply, keeping other factors constant, supply of a good rises when its price falls and supply falls when price rises.

Examples of such goods are:
1. Rare goods:

Certain goods are rare and hence even if there is a significant rise in their prices, their supply does not rise. For example, ancient coins, ancient idols, original manuscripts, old books, ancient handicrafts etc.
An important point to note is that such goods are not produced on a daily basis. Hence,-it will be incorrect to consider these goods as exceptions to the law of supply. So, such goods should be kept out of the study of supply.

2. Perishable goods:

Highly perishable goods like milk, milk products, green vegetables, meat, eggs, fish, ripe fruits, flowers, etc. cannot be stored for a long time.
Hence, even if their price falls their supply will not contract because they cannot be preserved and hence must be sold.
In current times with availability of storing such goods in cold storages even this exception is a matter of debate.

Discussion

40.	What is leftward shift of supply curve?
Answer» Keeping price factor as constant, if supply decreases due to any other factor, the. supply curve will shift towards left which is called leftward shift in supply curve.

Discussion

41.	Define price elasticity of supply .
Answer» Price elasity of supply refers to the degree of responsiveness of supply of a commodity with reference to a change in the price of such commdity

Discussion

42.	What is increase-decrease of supply?
Answer» Assuming price as constant if the supply increase/decrease due to some other factors, it is known as increase/ decrease in supply.

Discussion

43.	What is rightward shift of supply curve?
Answer» Keeping price factor as constant, if supply increases due to any other factor, the supply curve will shift towards right which is called rightward shift in supply curve.

Discussion

44.	State few factors that can be responsible for rightward shift of supply curve?
Answer» The factors responsible for rightward shift could be fall in cost of production, fall in prices of factors of production, improvement in technology, rise in number of suppliers, government policies, etc.

Discussion

45.	Sellers aim at profit maximization which results in ________(A) Positive relationship between price and supply(B) Negative relationship between price and supply(C) Equilibrium of supply and demand(D) Unrealistic price determination.
Answer» Correct option is (A) Positive relationship between price and supply

Discussion

46.	What are the 3 Determinants of Market Supply?
Answer» 3 Determinants of Market Supply are: Number of firms in the market Future expectation regarding price Means of transportation and communication

46.

What are the 3 Determinants of Market Supply?

Answer»

3 Determinants of Market Supply are:

Number of firms in the market
Future expectation regarding price
Means of transportation and communication

Discussion

47.	Define Marker Supply Schedule (MSS).
Answer» Marker Supply Schedule refers to a tabular statement showing various quantities of a commodity that all the producers are willing to sell at various levels of price, during a given period of time.

Discussion

48.	Supply is aways unitary elastic for all supply curves starting form the origin.
Answer» True: Any supply curve, which passes through the origin, has unitary elastic supply (irrespective of the angle it makes with the origin).

Discussion

49.	What is the Supply Curve?
Answer» Supply curve refers to a graphical representation of the supply curve.

Discussion

50.	The given diagram is a case of …………….. Supply A. Less Elastic SupplyB. highly Elastic SupplyC. Unitary Elastic SupplyD. Perfectly Elastic Supply
Answer» Correct Answer - B here, responsiveness of change in quantity demanded due to the change in price is greater than1.

Discussion

Explore topic-wise InterviewSolutions in .

The supply curve of a good shifts to the right when prices of other goods rise.

In case of __ supply falls at the same price.A. decrease in supplyB. contraction in supply.C. increase in supplyD. expansion in supply

Which of the following falls in the category of goods that do not follow the law of supply?(A) Rare goods(B) Precious goods(C) Perishable goods(D) Both (A) and (C)

If nothing is supplied event at a marginally reduced price, what will be the elasticity of supply ?

There are three different supply curves passing through the origin. Curve A makes an angle of `60^(@)` Curve B makes an angle of `45^(@)` and curve C makes an angle of 30°. What will be the price elasticily of curves A, B and C?

How does an increase in the price of the an input of affect the supply curve of firm ?

How does an icreasae in the price of an input affect the market supply curve ?

The following supply curves shits from SS to `S_(1)S_(1)` due to: A. Decrease in TaxesB. Upgradation of techologyC. Fall in the price of inputsD. All of the above

Distinguish : Stock and Supply.

Why is the law of supply not applicable to rare articles?

How does the imposition of a unit tax affects the supply curve of a firm ?

Howe dose technological progress affect the supply curve of a frim ?

Which one of the following is the result of increase in price of factors of production ?A. Price of the commodityB. Period of timeC. Willingess to buyD. Quantity of the commodity

Which of the following varies in the law of supply?(A) Competition(B) Natural factors(C) Number of sellers(D) None of these

Changes in cost of factors of production affect supply. Give reason.

Which of the following is not an assumption of the law of supply?(A) Technological changes are inevitable(B) Level of competition remains the same(C) Expectations regarding future prices are ignored(D) Government policy is constant

Which of the following is not a essential element of supply ?A. highly elasticB. Unitary elasticC. Perfectly inelasticD. Less elastic

In the long period , the supply for a commodity is :A. Perfectly InelasticB. Less ElasticC. Highly ElasticD. Perfectly Elacstic

The following supply schedule is unitary elastic.

Stock is always ________ than supply.(A) Higher(B) Lower(C) Not higher(D) Negligible

Which are the two matters on, which law of supply is presented?

Define supply.

How is the slope of supply curve?

What are the changes that take place in supply due to change in factors other than price?(A) Increase(B) Expansion(C) Expansion-contraction(D) Increase-decrease

Differentiate between expansion-contraction of supply and increase-decrease of supply.

How few countries expand their supply using advanced technology?

The given supply schedule represents__. A. Expansion is SupplyB. Increase in supplyC. Constractin in SupplyD. Decrease is supply

What decreases, therefore profit decreases and due to that supply decreases?(A) Stock(B) Supply(C) Price(D) Price elasticity of demand

What is the relationship between price and supply of commodity?(A) Direct(B) Opposite(C) Equal(D) Zero

Into how many major categories can we classify determinants of supply?(A) 2(B) 3(C) 4(D) 5

When other factors are assumed constant and price varies, of supply takes place.(A) Increase(B) Expansion and contraction(C) Decrease(D) All of these

What is market supply?

Change in the pirce of the given commodity will lead to :A. Expansion is SupplyB. conrtaction in supplyC. either (a) or (b)D. Neither (a) and (b)

Individual supply curve is ________ whereas market supply curve is(A) Positive; Negative(B) Negative; Negative(C) Negative; Positive(D) Positive; Positive

A straight-line supply curve cuts X-axis in its positive range. What can you say about the elasticity of supply ? OR What is the price elasticity of supply of a straight line supply curve touching the OX-axis?

Explain briefly how does change in supply takes place.

Explain the exceptions to the law of supply.

What is leftward shift of supply curve?

Define price elasticity of supply .

What is increase-decrease of supply?

What is rightward shift of supply curve?

State few factors that can be responsible for rightward shift of supply curve?

Sellers aim at profit maximization which results in ________(A) Positive relationship between price and supply(B) Negative relationship between price and supply(C) Equilibrium of supply and demand(D) Unrealistic price determination.

What are the 3 Determinants of Market Supply?

Define Marker Supply Schedule (MSS).

Supply is aways unitary elastic for all supply curves starting form the origin.

What is the Supply Curve?

The given diagram is a case of …………….. Supply A. Less Elastic SupplyB. highly Elastic SupplyC. Unitary Elastic SupplyD. Perfectly Elastic Supply