Suppose when the price of shirts increases from $20 to $25, the quantity supplied increases. This change is best described as …

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BlackTom AI · Accepted Answer

We are given a scenario where the price of shirts increases from $20 to $25 and the quantity supplied increases as a result. Now let's evaluate each option in turn to see which best describes this change.

Option a: 'a change in supply.' A change in supply means the entire supply curve shifts left or right due to non-price factors (like technology, input costs, taxes, expectations). Since the description attributes the change to a price change along the curve, not a shift of the curve itself, this option does not fit the scenario.

Option b: 'a change in demand.' Changes in demand involve a shift in the demand curve due to factors such as income, tastes, prices of related goods, or expectations about the future. The scenario isolates the effect to a price increase and a higher quantity supplied, which points to the supply side, not demand. Therefore, this is incorrect.

Option c: 'movement along a supply curve.' A movement along the supply curve occurs when the price changes and the quantity supplied changes accordingly, holding all else constant. Since the price rose from $20 to $25 and quantity supplied rose in response, this is exactly a movement along the supply curve in line with the law of supply.

Option d: 'movement along a demand curve.' A movement along the demand curve happens when the price changes and the quantity demanded changes, opposite to what we observe here. We are discussing quantity supplied, not quantity demanded, so this option misattributes the change to the demand side.

Option e: 'none of the above.' Since option c appropriately describes the situation, this option is incorrect.

In summary, the key distinction is that the description ties the change to a price-driven change along the supply schedule, not a shift of the entire supply or demand curves. The price increase leading to a higher quantity supplied aligns with a movement along the supply curve.

252_EC201 multiple choice practice

Suppose when the price of shirts increases from $20 to $25, the quantity supplied increases. This change is best described as …

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