Class 12 Microeconomics Sandeep Garg Solutions Chapter 9 – Supply
FAQs on Sandeep Garg Class 12 Microeconomics Chapter 9 Solutions
1. How do I solve a numerical problem to calculate the price elasticity of supply using the percentage method?
To solve for the price elasticity of supply (E_s), you need to follow these steps:
1. First, calculate the percentage change in quantity supplied: (Change in Quantity ÷ Original Quantity) × 100.
2. Next, calculate the percentage change in price: (Change in Price ÷ Original Price) × 100.
3. Finally, divide the percentage change in quantity supplied by the percentage change in price. The formula is: E_s = (% Change in Quantity Supplied) / (% Change in Price). Remember to use the initial price and quantity as the base for your calculations.
2. What is the correct way to explain the difference between a 'shift in the supply curve' and a 'movement along the supply curve'?
A movement along the supply curve, also called a change in quantity supplied, is caused only by a change in the price of the commodity itself. An increase in price causes an upward movement (expansion), while a decrease in price causes a downward movement (contraction).
A shift in the supply curve, or a change in supply, is caused by changes in factors other than the commodity's own price, such as technology, input prices, or taxes. A rightward shift indicates an increase in supply, while a leftward shift indicates a decrease in supply.
3. How should I explain the effect of an improvement in technology on a firm's supply for a 3-mark question?
For a 3-mark question, you should structure your answer as follows:
- Introduction: State that technological improvement is a key determinant of supply.
- Explanation: Explain that advanced technology makes production more efficient, lowering the cost of production per unit.
- Conclusion: Since it is now more profitable to produce at the same price, the producer increases output. This leads to an increase in supply, causing the supply curve to shift to the right.
4. How do I correctly draw a diagram to show an 'increase in supply'?
To correctly draw a diagram showing an 'increase in supply', you should:
1. Draw the initial supply curve, labeling it 'S', sloping upwards from left to right. Label the X-axis 'Quantity Supplied' and the Y-axis 'Price'.
2. Show an initial equilibrium point on the curve.
3. Draw a new supply curve to the right of the original curve and parallel to it. Label this new curve 'S1'.
4. Use an arrow to indicate the direction of the shift from S to S1. This rightward shift shows that more is supplied at each price level.
5. Why is the supply curve generally upward sloping? What is the economic logic behind it?
The supply curve slopes upwards because of the law of supply, which states that, other factors remaining constant, producers are willing to sell more of a good at a higher price. The key economic reason is profit motive. As the price of a good rises, it becomes more profitable for firms to produce and sell it. Higher prices cover the higher marginal costs of producing additional units, incentivising firms to increase their output.
6. If the cost of a key raw material for a product increases, but the government also provides a new subsidy, how do I determine the net effect on supply?
This is a higher-order thinking question where two factors change simultaneously. You need to analyse the impact of each:
- An increase in raw material cost raises the cost of production, which tends to decrease supply (shift the curve left).
- A new government subsidy lowers the cost of production, which tends to increase supply (shift the curve right).
7. What is a common mistake students make when distinguishing between 'contraction in supply' and 'decrease in supply'?
The most common mistake is confusing the causes. A 'contraction in supply' is a movement down along the same supply curve and is caused *only* by a fall in the product's own price. A 'decrease in supply' is a backward or leftward shift of the entire supply curve, caused by factors other than price, like higher taxes, increased input costs, or outdated technology. Always link contraction to price change and decrease to other factors.
8. How do I solve a problem asking for market supply when individual supply schedules of two firms are given?
To find the market supply schedule, you simply perform a horizontal summation of the individual supply schedules. This means that for each price level, you add up the quantities supplied by each firm. For example, if at a price of ₹10, Firm A supplies 20 units and Firm B supplies 30 units, the market supply at ₹10 is 20 + 30 = 50 units. Repeat this addition for every price point given in the schedules to create the final market supply schedule.











