Question

which of the following could explain the shift from s1 to s2? the supplier began to produce a more profitable good instead. innovative technology has caused resource costs to decrease. the cost of a necessary resource in producing the good increased. two suppliers, that were major competitors, went out of business.

Answer 1

The shift from s1 to s2 could be explained by two factors: the supplier beginning to produce a more profitable good and two major competitors going out of business.

Step-by-step explanation:

The first factor, the supplier transitioning to produce a more profitable good, implies a strategic decision to optimize revenue. Let's denote the profit from producing s1 as π₁ and from producing the new good as π₂. If π₂ > π₁, the supplier would naturally shift production to the more lucrative option. This aligns with basic economic principles, as rational businesses seek to maximize profits. The shift is a rational response to changing market conditions.

The second factor involves the exit of two major competitors. This could result in a decrease in market supply (Q) due to a reduction in the number of suppliers (N). The equation Q = N * q (where q is the quantity supplied by each supplier) suggests that a decrease in N would lead to a decrease in Q, assuming q remains constant. A reduction in market supply, ceteris paribus, may increase the market price for the goods, making it more attractive for the remaining suppliers, like the one in question, to increase production.

In conclusion, the shift from s1 to s2 can be explained by both profit optimization through product choice and changes in market dynamics due to the exit of major competitors. The supplier's decision is not isolated but rather a strategic response to both internal profit considerations and external market shifts.

Answer 2

The shift from S1 to S2 can be explained by various factors such as changes in the goods produced, resource costs, and competition in the market.

Step-by-step explanation:

The shift from S1 to S2 could be explained by several factors including:

The supplier began to produce a more profitable good instead, which would cause them to increase the supply of that good.

Innovative technology causing resource costs to decrease, which would make it cheaper for the supplier to produce the good and lead to an increase in supply.

The cost of a necessary resource in producing the good increased, resulting in higher production costs and a decrease in supply.

Two major competitors going out of business, which would likely increase market share for the remaining suppliers and lead to an increase in supply.

These factors can impact the supply curve and result in a shift from S1 to S2.