If potatoes and tomatoes can be grown on the same land, a decrease in the price of potatoes, other things being equal, will cause:A.a downward movement on the supply curve for tomatoes.B.no change in the supply curve for tomatoes.C.a leftward shift in the supply curve for tomatoes.D.a rightward shift in the supply curve for tomatoes.E.an upward movement on the supply curve for tomatoes.
Question
If potatoes and tomatoes can be grown on the same land, a decrease in the price of potatoes, other things being equal, will cause:A.a downward movement on the supply curve for tomatoes.B.no change in the supply curve for tomatoes.C.a leftward shift in the supply curve for tomatoes.D.a rightward shift in the supply curve for tomatoes.E.an upward movement on the supply curve for tomatoes.
Solution
The answer is C. a leftward shift in the supply curve for tomatoes.
Here's why:
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If potatoes and tomatoes can be grown on the same land, they are considered substitute goods in terms of production.
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A decrease in the price of potatoes means that farmers would earn less profit from growing potatoes.
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Assuming other things being equal (ceteris paribus), farmers would want to switch to growing more profitable crops to maximize their profits. In this case, they would switch to growing more tomatoes.
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As more farmers switch from growing potatoes to tomatoes, the supply of tomatoes increases.
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An increase in supply, with demand remaining constant, is represented by a rightward shift in the supply curve. However, the question asks for the effect on the supply curve for tomatoes if there is a decrease in the price of potatoes. This would cause a decrease in the supply of potatoes and an increase in the supply of tomatoes, which is represented by a leftward shift in the supply curve for potatoes and a rightward shift in the supply curve for tomatoes.
So, the correct answer is C. a leftward shift in the supply curve for tomatoes.
Similar Questions
Which of the following scenarios would likely shift the supply curve for potatoes to the right (increase in supply)?multiple choiceTeenagers in potato-farming towns leave to go to college.The price of fertilizer increases.Potato growers expect the price of potatoes to be lower this year than last year.A new harvester enables farmers to bring in ripe potatoes twice as fast as they did before.
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Suppose increased demand for corn for ethanol production has resulted in record high corn prices. Which is likely to happen to the supply of wheat, assuming that corn and wheat are substitutes in production?There will be a movement from one point on the supply curve to a higher point on the curve.The supply curve will shift left.There will be a movement from one point on the supply curve to a lower point on the curve.The supply curve will shift right.
A leftward shift of a supply curve would result from:lower production costs.an increase in the price of an alternative product that could be produced with the same resources.a decrease in the price of the product.more sellers of the product.
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