State whether the following statement are TRUE and FALSE.
i. If price falls, the supply curve will shift to left.
i. If price falls, the supply curve will shift to left.
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.
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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.
