Check Your Understanding

1. Question

   Explain whether each of the following events represents (i) a change in supply or (ii) a movement along the supply curve.

   1. During a real estate boom that causes house prices to rise, more homeowners put their houses up for sale.

      The quantity of houses supplied rises as a result of an increase in prices. This is a movement along the supply curve.

   2. Many strawberry farmers open temporary roadside stands during harvest season, even though prices are usually low at that time.

      The quantity of strawberries supplied is higher at any given price. This is an increase in supply, which shifts the supply curve to the right.

   3. Immediately after the school year begins, fewer young people are available to work. Fast-food chains must raise wages, which represent the price of labor, to attract workers.

      The quantity of labor supplied is lower at any given wage when school is in session. This is a decrease in supply, which shifts the supply curve to the left.

   4. Many construction workers temporarily move to areas that have suffered hurricane damage, lured by higher wages.

      The quantity of labor supplied rises in response to a rise in wages. This is a movement along the supply curve.

   5. Since new technologies have made it possible to build larger cruise ships (which are cheaper to run per passenger), Caribbean cruise lines have offered more cabins, at lower prices, than before.

      The quantity of cabins supplied is higher at any given price. This is an increase in supply, which shifts the supply curve to the right.

2. Question

   After each of the following events, will the supply curve for the good that is mentioned shift to the left, shift to the right, or remain unchanged?

   1. The coffee berry borer beetle destroys large quantities of coffee berries.

      The supply curve shifts to the left.

   2. Consumers demand more bike helmets than ever.

      The supply curve remains unchanged.

   3. The number of tea producers increases.

      The supply curve shifts to the right.

   4. The price of leather, an input in wallet production, increases.

      The supply curve shifts to the left.