The diagram below represents the producer side of the market for skateboards in New York.The current price of skateboards is P_A.Each of the events described below will have some impact on the supply of skateboards.For each event,draw a picture to illustrate the effect of the event.Be sure to explain your pictures using pertinent economic terminology ("movement along" or "change in quantity").
(a)A drop in the price of skateboards.
(b)An increase in the price of wheels used in the manufacturing of skateboards.

Question

The diagram below represents the producer side of the market for skateboards in New York.The current price of skateboards is P_A.Each of the events described below will have some impact on the supply of skateboards.For each event,draw a picture to illustrate the effect of the event.Be sure to explain your pictures using pertinent economic terminology ("movement along" or "change in quantity").

The diagram below represents the producer side of the market for skateboards in New York.The current price of skateboards is P<sub>A</sub>.Each of the events described below will have some impact on the supply of skateboards.For each event,draw a picture to illustrate the effect of the event.Be sure to explain your pictures using pertinent economic terminology ( movement along or change in quantity ). (a)A drop in the price of skateboards. (b)An increase in the price of wheels used in the manufacturing of skateboards.

(a)A drop in the price of skateboards.
(b)An increase in the price of wheels used in the manufacturing of skateboards.

Quizplus · Accepted Answer

The Answer is (a)The diagram:

(a)The diagram: A drop in the price of skateboards,say from P<sub>A</sub> to P<sub>B</sub>,results in a movement downward along the supply curve,such as shown above from A to B,resulting in fewer skateboards offered for sale (Q<sub>A</sub> to Q<sub>B</sub>).Using economic terminology,this is referred to as a decrease in the quantity supplied.(b)The diagram: An increase in price of wheels used in making the skateboards means the cost of manufacturing skateboards increases.This results in a shift up (left)of the supply curve for skateboards,from S to S'.At the original price of P<sub>A</sub>,sellers were willing to supply the quantity at Point A on supply S but now are willing to sell the quantity at Point B on S'.Using economic terminology,this leftward shift of the supply curve is referred to as a decrease in supply.

A drop in the price of skateboards,say from P_A to P_B,results in a movement downward along the supply curve,such as shown above from A to B,resulting in fewer skateboards offered for sale (Q_A to Q_B).Using economic terminology,this is referred to as a decrease in the quantity supplied.(b)The diagram:

An increase in price of wheels used in making the skateboards means the cost of manufacturing skateboards increases.This results in a shift up (left)of the supply curve for skateboards,from S to S'.At the original price of P_A,sellers were willing to supply the quantity at Point A on supply S but now are willing to sell the quantity at Point B on S'.Using economic terminology,this leftward shift of the supply curve is referred to as a decrease in supply.

The Diagram Below Represents the Producer Side of the Market