# 12th Economics Chapter 4 Exercise (Supply Analysis) Maharashtra Board – Free Solution

## Chapter 4 – Supply Analysis

### Q. 1. Complete the following statements

1) When supply curve is upward sloping, it’s slope is _____.
a) positive
b) negative
c) first positive then negative
d) zero

2) An upward movement along the same supply curve shows _____.
a) contraction of supply
b) decrease in supply
c) expansion of supply
d) increase in supply

3) A rightward shift in supply curve shows _____.
a) contraction of supply
b) decrease in supply
c) expansion of supply
d) increase in supply

4) Other factors remaining constant, when less quantity is supplied only due to a fall in price, it shows _____.
a) contraction of supply
b) decrease in supply
c) expansion of supply
d) increase in supply

5) Net addition made to the total revenue by selling an extra unit of a commodity is _____.
a) total Revenue
b)marginal Revenue
c)average Revenue
d)marginal Cost

### Q. 2. Complete the correlation

1) Expansion of supply : Price rises : : Contraction of supply : Price falls

2) Total revenue : P X Q : : Average revenue : TR/TQ

3) Total cost : TFC + TVC : : Average cost : TC/TQ

4) Demand curve : Downward : : Supply curve : Upward

5) Price constant : Change in supply : : Other factors constant : Variation of Supply

### Q. 3. Give economic terms

1) Cost incurred on fixed factor.

2) Cost incurred per unit of output.

3) Net addition made to total cost of production.

4) Revenue per unit of output sold.

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### Q.4. Distinguish between

1) Stock and Supply.

2) Expansion of Supply and Increase in Supply.

3) Contraction of Supply and Decrease in Supply.

4) Average Revenue and Average Cost.

### Q.5. Observe the following table and answer the questions

A) Supply schedule of chocolates

1) Complete the supply schedule.

2) Draw a diagram for the above supply schedule.

3) State the relationship between price and quantity supplied.

B) Observe the market supply schedule of potatoes and answer the following questions.

1) Complete the quantity of potato supplied by the firms to the market in the below table.

2) Draw the market supply curve from the schedule and explain it.

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### Q.6. Answer the following questions

1) Explain the concept of total cost and total revenue.

Answer: Elasticity of demand depends upon several factors which are discussed below:

1) Nature of commodity: By nature we can classify commodities as necessaries, comforts and luxury goods. Demand for necessaries like foodgrains, medicines, textbooks etc. is relatively inelastic and for comforts and luxury goods like cars, perfumes, furniture etc. demand is relatively elastic.

2) Availability of substitutes: Demand for a commodity will be more elastic, if its close substitutes are available in the market. For example, lemon juice, sugarcane juice etc. But commodities having no close substitutes like salt the demand will be inelastic.

3) Number of uses: Single use goods have a less elastic demand. Multi-use goods have more elastic demand, For example, coal, electricity etc.

4) Habits: Habits make demand for certain goods relatively inelastic. For example, addicted goods, drugs etc.

5) Durability: The demand for durable goods is relatively elastic. For example, furniture, washing machine etc. Demand for perishable goods is inelastic. For example, milk, vegetables etc.

6) Complementary goods: The demand for a commodity which is used in conjunction with other commodities to satisfy a single want is relatively inelastic. For example, a fall in the price of mobile handsets may lead to rise in the demand for sim cards.

7) Income of the consumer: Demand for goods is usually inelastic, if the consumer has high income. The demand pattern of a very rich and an extremely poor person is rarely affected by significant changes in the
price.

8) Urgency of needs: Goods which are urgently needed will have relatively inelastic demand. For example, medicines. Luxury goods which are less urgent have relatively elastic demand.

9) Time period: Elasticity of demand is always related to period of time. It varies with the length of time period. Generally speaking, longer the duration of period greater will be the elasticity of demand and
vice-versa.

Note: If question is asked for 8 marks write 9 to 10 points and if question is asked for 4 marks write 4 to 6 points ( Use this suggestion for all questions and chapters)

2) Explain determinants of supply.

### Q.6. Answer the following questions

3) State and explain law of supply with exceptions.

The law of supply is also a fundamental
principle of economic theory like law of
demand. It was introduced by Prof. Alfred
Marshall in his book, ‘Principles of Economics’
which was published in 1890. The law explains
the functional relationship between price and
quantity supplied.

Statement of the Law :

“Other things being constant, higher the

price of a commodity, more is the quantity
supplied and lower the price of a commodity less
is the quantity supplied”

In simple words, “other factors remaining

constant, a rise in price results in a rise in the
quantity supplied and vice-versa. Thus, there is
a direct relationship between price and quantity
supplied.
Symbolically,

Sx = f (Px)
S = Supply
x = Commodity

f = Function
P = Price of commodity

Law of supply is explained with the help of the following schedule and diagram:

Exceptions to the Law of Supply:

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### Extra Questions

(1) Total revenue and marginal revenue.

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