### Understanding the Impact of Decrease in Resource Prices on the Supply Curve of Good Y**Scenario:**Resource X is necessary in the production of good Y. If the price of resource X decreases, the following changes can occur in the supply curve of good Y:**Options:**- **A.** the supply curve of Y shifts leftward.- **B.** the supply curve of Y shifts rightward.- **C.** the supply curve of Y is unaffected.- **D.** there is a movement down along the supply curve of Y.- **E.** there is a movement up along the supply curve of Y.### Explanation1. **Supply Curve Shift (A and B):** - A shift in the supply curve indicates a change in the quantity supplied at every price level. - If the price of an essential resource (X) for the production of good Y decreases, producers can produce more of good Y at a lower cost. Consequently, the supply curve would **shift rightward (Option B)**, reflecting an increase in supply. - A leftward shift (Option A) would imply a decrease in supply, which does not align with a decrease in production costs.2. **No Influence (C):** - If the supply curve of Y is unaffected (Option C), it implies that the change in the price of resource X has no impact on the production of Y. This scenario only applies if resource X is not a significant component in the production of good Y, which contradicts the initial statement that resource X is necessary for producing Y.3. **Movements Along the Supply Curve (D and E):** - A movement along the supply curve refers to a change in quantity supplied due to a change in price of the good itself, not due to a change in production costs. Therefore, a decrease in the price of resource X will not result in movements along the supply curve of Y, eliminating options D and E.### ConclusionGiven the scenario, the correct response is:- **B.** the supply curve of Y shifts rightward.This increase in supply is due to the reduction in costs for producers as the price of an essential resource (X) decreases, allowing more of good Y to be produced efficiently.

Answer: Correct option: B (The supply curve of Y shifts rightward) Explanation: X is an input used…

Resource X is necessary in the production of good Y. If the price of resource X decreases A) the supply curve of Y shifts leftward. В the supply curve of Y shifts rightward. C) the supply curve of Y is unaffected. there is a movement down along the supply curve of Y. there is a movement up along the supply E curve of Y.

Resource X is necessary in the production of good Y. If the price of resource X decreases A) the supply curve of Y shifts leftward. В the supply curve of Y shifts rightward. C) the supply curve of Y is unaffected. there is a movement down along the supply curve of Y. there is a movement up along the supply E curve of Y.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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