Solution

THEORY OF SUPPLY

Class 11 - Economics
Section A
1.
(b) more elastic
Explanation: Durable goods are relatively more elastic in supply than perishable goods because durable goods have a longer
shelf time than the perishable goods.
2.
(c) Es = 1
Explanation: A straight line upward-sloping supply curve shooting from the origin always shows Es= 1. Percentage change in
quantity supplied is equal to the percentage change in price.
3.

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(b) unitary elastic
Explanation: At any point on a straight line, the supply curve going through the origin price elasticity will be one. The supply
for such a commodity is said to be unitary elastic.

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4. (a) (+)1.2
Explanation: Elasticity of supply = %age change in quantity supplied/%age change in price change
= 60%/50% = 1.2
(+)1.2
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5. (a) agricultural and perishable commodities
Explanation: The positive relationship between own price and quantity supplied of a commodity may not hold good in the
case of agricultural output, goods of social distinction and perishable goods.
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6.
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(d) less elastic

Explanation: A straight line supply curve cuts the Y-axis in its negative range. The supply will be less elastic. It means the
percentage change in quantity supplied changes by a lower percentage than the percentage of price change.
7.
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(c) to right on another supply curve

Explanation: Increase in supply refers to a situation when more is supplied at the existing price of the commodity. It leads to a
forward shift in the supply curve.
8.
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(b) perfectly inelastic supply

Explanation: The vertical straight-line supply curve shows zero elasticity of supply. It is a curve showing constant supply, no
matter what the price is.
9.
(d) all of these
Explanation: Increase in supply refers to a situation when more is supplied at the existing price of the commodity. It leads to a
forward shift in the supply curve. Increase in supply may occur due to improvement in technology, reduction in factor prices, a
decrease in the price of a competing product etc.
10.
(c) long period
Explanation: Longer the time period, greater will be the elasticity of supply. Because, over a long period of time, factors are
easily available and supply can be easily increased.
11.
(c) A is true but R is false.
Explanation: A is true but R is false.

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12. (a) Both A and R are true and R is the correct explanation of A.
Explanation: Both A and R are true and R is the correct explanation of A.
13.
(b) Both A and R are true but R is not the correct explanation of A.
Explanation: Both A and R are true but R is not the correct explanation of A.
14. (a) Both A and R are true and R is the correct explanation of A.
Explanation: Both A and R are true and R is the correct explanation of A.
15. (a) Both A and R are true and R is the correct explanation of A.
Explanation: Both A and R are true and R is the correct explanation of A.
16. (i)-(c), (ii)-(e), (iii)-(a), (iv)-(b), (v)-(d)
17.
(b) decrease in supply
Explanation: In case of a decrease in supply, the supply falls at the same price.
18.

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(c) direct
Explanation: Law of supply shows direct relation between price and supply.
19. (a) only i
Explanation: Stock refers to the total quantity of a commodity available with the seller at any given time.

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20.
(c) Only C
Explanation: Price Elasticity of supply is the ratio between percentage change in quantity supplied and percentage change in
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the price of a good.
21.
(d) There is difference between supply and stock.
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Explanation: There is difference between supply and stock.
22. Supply of a good said to be perfectly elastic when its quantity supplied expands or contracts to any extent without any change or
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with very little change in price.

23. The functional relationship between supply and the determinants of supply like the price of the commodity, price of related goods,
etc. is known as the supply function.
24. Decrease in price of the commodity causes a downward movement along a supply curve of a commodity. For eg. If the price of
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the commodity falls by Rs 2 and as a consequence of that supply falls by 20 units then there will be a downward movement along
the supply curve.
25. When there is infinite supply at a particular price and the supply becomes zero with a slight fall in price, then the supply of such a
commodity is perfectly elastic. In such a case E = ∞ and the supply curve is a horizontal line parallel to the X axis.
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26. Supply curve, in economics, graphic representation of the relationship between product price and quantity of product that a seller
is willing and able to supply. Supply curve generally slopes upward, showing a positive relationship between price and quantity
supplied of a commodity.
Section B

Price SS1 (kg) SS2 (kg) Market Supply = SS1 + SS2

27.
0 0 0 0+0=0

1 0 0 0+0=0

2 0 0 0+0=0

3 1 0 1+0=1

4 2 0.5 2 + 0.5 = 2.5

5 3 1 3+1=4

6 4 1.5 4 + 1.5 = 5.5

7 5 2 5+2=7

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 8 6 2.5 6 + 2.5 = 8.5
The market supply is the total quantity of a good or service that all producers are willing to supply at the prevailing set of relative
prices during a defined period of time.
28. In case of an increase in input price, Cost tends to rise. This will reduce the profits of the producers. Accordingly, producers will
supply less of the good at its constant price. This implies a backward shift in supply curve. From SS to S1S1, or decrease in
supply.
However, if input prices fall, Cost will also fall. This will increase the profits of the producers. Accordingly, producers will supply
more of the good at the constant price. Then supply curve of that good shifts to rightward. From SS to S2S2.

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29. The elasticity of supply establishes a quantitative relationship between the supply of a commodity and it’s price. Hence, we can
express the numeral change in supply with the change in the price of a commodity using the concept of elasticity. Infinite
elasticity of supply refers to a horizontal straight line supply curve showing infinite supply corresponding to a particular price of a
commodity as shown in the figure.

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30. Two factors that can cause increase in supply curve are:
i. Reduction in factor price :It will decrease the cost of production due to which profit increases. In this situation, the supplier
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will increase the supply of the commodity.

ii. Decrease in taxation: Decrease in taxes by government will also decrease the cost of production due to which profit increases
In this situation, the supplier will increase the supply of the commodity.
31. Law of supply states that other things remaining constant, quantity supplied increases with increase in own price of a commodity
and vice-versa.
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Assumptions of the Law of Supply:

there this no change in the price of the factors of production.
there this no change in the technique of production.
there this no change in the goal of the firm.
there this no change in the price of related goods.
there this no change in the business expectations.
Section C
32. The term extension and contraction in supply is used for changes in quantity supplied due to the changes in the price of a
commodity. When the rise or fall in the price of a commodity brings about an increase or decrease in quantity supplied of the
commodity, while other determinant factors of supply remain constant, this is called Extension in Supply.

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 In the given figure, the initial price of a commodity is P, the initial quantity supplied is Q. Now, if the price rises from P to P1, the
quantity supplied increases from Q to Q1. Thus the supply increases from A to B. This is an extension of supply.
Likewise, it is shown in the other figure, that when the price reduces from (initial price) P to (new) P1​, the quantity supplied
reduces from Q1 to Q. This has been shown by a downward movement from B to A. This is called contraction of supply.
Section D

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33. State True or False:

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(i) (a) True
Explanation: True
(ii) (b) False
Explanation: False. When a firm is using rigid technology, Es tends to be low. Because possibilities of variations in

(iii)
output are reduced.
(b) False
Explanation: False
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(iv) (b) False
Explanation: False. Increase in supply means more is sold at a given market price.
(v) (b) False
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Explanation: False. An increase in price leads to an increase in the quantity supplied of a commodity. It does not
lead to a shift in the supply curve. The shift in the supply curve is related to determinants, other than own price of the
commodity.
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