Question

Yakov is skilled at making both bracelets and necklaces. Yakov has no preference between making bracelets or necklaces since he earns the same amount from the two activities. If the selling price of necklaces increases from $12 to $24, then Yakov's opportunity cost of making bracelets and making bracelets is now profitable than making necklaces. Suppose that the bracelets market consists of several suppliers like Yakov who are skilled at making both bracelets and necklaces. Which of the following is likely to happen to the supply curve of bracelets when the price of a necklaces increases?
a. It shifts to the right
b. It shifts to the left
c. It does not change

Answer 1

Answer:b. It shifts to the left

Explanation:

The supply will increases as price increases and vice versa. When the price increases and supply also increases the supply curves shifts to the right and when the price decreases and supply equally decreases supply curves shifts to the left.

In the above scenario since bracelet and necklace are exclusive products the sellers will be willing to supply more of necklace since the price has increased and less of bracelet since the price has fallen and the fall in price which leads to fall in supply of bracelet will shift bracelet supply curves to the left.