Question

Consider the market for paperbound economics textbooks. Explain whether the following events would cause an increase or decrease in supply or an Increase or decrease in the quantity supplied of paperbound economics textbooks. The market price of paper Increases:
a. Supply Increases
b. Supply decreases
c. Quantity supplied increases
d. Quantity supplied decreases

Answer 1

The market price of paper Increases: Supply decreases.

Explanation:

The price and the supply are directly related to each other. This means that when the price of the product increases the supply also increases and vice versa. In the given example, the market for economic textbooks is discussed. The textbook is paperbound.

This means that the supply and the price of the textbook highly depend on the paper price and its marketing conditions. When the market price of the papers increases, it will result in a decrease in the demand that exists for the paper. This ultimately causes the supply of the textbooks to decrease as the manufacturing of textbooks is highly related to the papers.

Answer 2

Answer:

b. Supply decreases

Explanation:

Supply is the quantity of goods sellers are able & willing to sell at a given price, period of time.

Factors affecting supply are : Price of good, price of other (substitute) goods,  Inputs price, technology, government policy .

• Change in supply quantity due to change in price of good is called as 'Change in Quantity Supplied'.
• Change in any other factors (other than price) causing the supply change is called 'Change in Supply'

'The price of paper increase' is the case of increase in 'inputs prices' (factor other than price). So, it will lead to change (decrease) in Supply.

Other cases examples :

• Supply increase : Improvement in Technology
• Quantity supplied increase : Price of the good increase
• Quantity supplied decrease : Price of the good decrease