Chapter 5 - Producer's Behaviour Economics Solutions for Class 12 Commerce Economics State whether the following statement are TRUE and FALSE.

State whether the following statement are TRUE and FALSE.

i. If price falls, the supply curve will shift to left.

ii. Stock is the source of supply.

iii. Supply is indirectly related to price.

iv. Geometric Method is also known as Point Method.

v. Total Cost is the total expenditure incurred by a firm.

vi. Supply for perishable goods is inelastic.

ANSWER:

i) If price falls, the supply curve will shift to left. - False

Explanation:
The above statement is incorrect. Other things remaining constant, a fall in price leads to a fall in supply. Such a fall in supply is known as contraction in supply. It is shown by a downward movement along the same supply curve. On the other hand, a parallel leftward shift of the supply curve represents that the supply falls as a result of change in factors other than price.



ii) Stock is the source of supply. - True

Explanation:
Yes, stock is the source of supply as supply is not possible without stock. Stock is the goods available with the seller. It includes both current stock and old stock. Accordingly, stock is the amount of goods that are available with the seller for sale at a given point of time. In other words, goods for supply is taken from stock. Hence, it is correct to say that stock acts as a source of supply.  

iii) Supply is indirectly related to price. – False

Explanation:
This statement is false, as supply of a good is directly related to price. This is because, higher prices means higher profit prospective for the seller. Accordingly, they prefer to increase sales as the price rise and vice-versa. Thus, supply is directly related to price of the commodity.

iv) Geometric Method is also known as Point Method. - True

Explanation:
The above statement is correct. The geometric method is also known as point method. This is because geometric method involves determination of supply at different points on the supply curve. This method does not involve any calculation part. Just by looking at the shape of the supply curve, one can infer the degree of the elasticity of supply.  

v) Total Cost is the total expenditure incurred by a firm. - True
Explanation:
Yes. Total cost refers to the total expenditure incurred by a firm to carry out the production of goods and services. It is the aggregate of expenditure incurred on fixed factors as well as variable factors. That is,

TC = TFC + TVC

vi) Supply for perishable goods is inelastic. - True

Explanation:
It is correct. Perishable goods (such as food grains, milk products etc.) are those goods that are subject to decay or spoilage. Since these goods cannot be stored for a longer time, their supply cannot be changed immediately in response to change in price. As a result, their supply is inelastic.

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