Given supply and demand curves for a nonrenewable natural resource in a competitive market, other things being equal, a shift of the supply curve to the left will

Question

Quizplus · Accepted Answer

When the supply curve shifts to the left, the equilibrium quantity decreases, and the equilibrium price increases. However, the magnitude of the decrease in equilibrium quantity depends on the elasticity of demand. If demand is elastic, the decrease in quantity will be more significant, whereas it will be relatively less if demand is inelastic. Therefore, option C is the correct answer. The other choices are incorrect because a leftward shift in the supply curve does not reduce the price of the natural resource, does not increase both the price and quantity supplied, and does not affect the number of producers willing and able to supply the resource.

Given Supply and Demand Curves for a Nonrenewable Natural Resource