Good X is produced in a competitive market using input A. Explain what would happen to the supply of good X in each of the following situations: a. The price of input A increases. It will increase. It will not change. It will decrease. b. An excise tax of $4 is imposed on good X. It will not change. It will decrease. It will increase. c. An ad valorem tax of 5 percent is imposed on good X. It will decrease. It will not change.
Good X is produced in a competitive market using input A. Explain what would happen to the supply of good X in each of the following situations:
a. The price of input A increases.
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It will increase.
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It will not change.
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It will decrease.
b. An excise tax of $4 is imposed on good X.
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It will not change.
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It will decrease.
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It will increase.
c. An ad valorem tax of 5 percent is imposed on good X.
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It will decrease.
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It will not change.
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It will increase.
d. A technological change reduces the cost of producing additional units of good X.
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It will increase.
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It will decrease.
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It will not change.
A competitive market is one in which the forces of demand and supply compute the equilibrium price and quantity of a product. The price of a product is the main factor of supply and demand for a product. However, elements other than price also affect the supply and demand of commodities. Those elements are responsible for the shift in the supply and demand curve.
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