Question

Indicate whether the event will cause MOVEMENT ALONG or a SHIFT in the supply curve:

"1. A decrease in the price of donuts
2. A change in expectations about the future price of donuts
3. A decrease in the number of producers"

Answer 1

A decrease in the price of donuts will cause a movement along the supply curve, while a change in expectations about the future price of donuts and a decrease in the number of producers will shift the supply curve.

Step-by-step explanation:

When examining how different events affect the supply curve in economics, it is crucial to distinguish between movements along the curve and shifts of the curve. For the events listed:

1. A decrease in the price of donuts would not shift the supply curve but would cause a movement along the supply curve because it is a change in the price of the product itself.
2. A change in expectations about the future price of donuts can cause a shift in the supply curve. If producers expect higher prices in the future, they may decrease current supply to sell more in the future, shifting the supply curve left. Alternatively, if they expect lower prices, they might increase current supply, shifting the curve to the right.
3. A decrease in the number of producers will shift the supply curve to the left because there are fewer suppliers to offer the product.

Thus, both a change in expectations about future prices and a decrease in the number of producers directly affect the supply factors, leading to a shift in the supply curve. On the other hand, a change in the price of the product itself causes a movement along the supply curve.