Supply curve shifts left
Whenever there is an outbreak of ‘foot-and-mouth’ disease in Australian farms, the result is an increase to the input prices for producing woollen jumpers. As a consequence, the supply of woollen jumpers shifts to the left on the graph, as shown below. The new equilibrium price is higher and the new equilibrium quantity of jumpers is lower.
The price of leather jackets falls
Demand curve shifts left
When the price of leather jackets falls, more people buy them, which in turn reduces the demand for …show more content…
Question 3 Many small boats are made of fibreglass, which is derived from petroleum. Suppose the price of crude oil rises.
Illustrate and explain what happens to the cost curves of an individual boat building firm and to the market supply curve?
The rise in the price of crude oil increases production costs for individual firms and therefore shifts the industry supply curve up, as shown in the diagram below. The firm's initial marginal-cost curve is MC1 and its average-total-cost curve is ATC1. In the initial equilibrium, the industry supply curve, S1, intersects the demand curve at price P1, which is equal to the minimum average total cost of the typical firm. Thus, the typical firm earns no economic profit.
Explain what happens to the: