Chapter 17: Problem 14

A decrease in supply can be brought about by (LO5) a) a price increase b) a price decrease c) a random event like a hurricane or an earthquake d) a change in consumers' tastes or preferences

Short Answer

Expert verified

A decrease in supply can be brought about by a random event like a hurricane or an earthquake (option c). Natural disasters and other random events can disrupt the production process, making it more difficult for suppliers to provide the same quantity of goods as before, resulting in a decreased supply.

Step by step solution

Option A: A price increase

A price increase will not bring about a decrease in supply, as suppliers are generally more willing to supply more of a product when the price is higher. This is because higher prices will result in larger profits for the supplier.

Option B: A price decrease

A price decrease may or may not bring about a decrease in supply, depending on the elasticity of supply. Elasticity of supply refers to the responsiveness of the quantity supplied to changes in price. A decrease in price may lead to a decrease in supply if the supply is elastic, meaning that suppliers are quick to respond to changes in price. However, if the supply is inelastic, meaning that suppliers are not as responsive to changes in price, a price decrease may not lead to a significant decrease in supply.

Option C: A random event like a hurricane or an earthquake

A random event, such as a hurricane or an earthquake, can indeed bring about a decrease in supply. Natural disasters and other random events can cause disruptions to the production process, making it more difficult for suppliers to provide the same quantity of goods as before. As a result, the overall supply will decrease.

Option D: A change in consumers' tastes or preferences

A change in consumers' tastes or preferences might cause a decrease in the demand for a particular good, but it would not directly cause a decrease in supply. However, if the decrease in demand is large enough, it could lead suppliers to produce less of the good, resulting in a decrease in supply over time. To conclude, the correct answer to this exercise is: c) A random event like a hurricane or an earthquake

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