Question

Fill in the blanks with appropriate alternatives given in the brackets:

i. _________________________ determines the potential supply. (Stock/ Output/ Supply/ Flow)

ii. When the price rises, there is __________ of supply. (extension/ contraction/ decrease/ increase)

iii. The vertical supply curve represents _____________ elasticity. (zero/ unit/ constant/ less)

iv. An increase in supply means selling a ____________ amount at the same price. (larger/ smaller/ constant/ less)

v. Total Revenue ÷ Number of units Sold = ________________ . (Average Cost/ Average Revenue/ Marginal Cost/ Total Cost)

Answer 1

i) Stock determines the potential supply.

Explanation:
Stock is the amount of goods that are available with the seller, for sale, at a given point of time. Thus, we can say that stock determines the potential supply.

ii) When the price rises, there is extension of supply.

Explanation:
When supply rises as a result of rise in price, it is known as extension in supply. Graphically, it is represented by an upward movement along the supply curve.



iii) The vertical supply curve represents zero elasticity.

Explanation:

The vertical supply curve represents zero elasticity. That is, the quantity supplied is totally unresponsive to the change in the price of a good.



iv) An increase in supply means selling a larger amount at the same price.

Explanation:

Increase in supply implies that a larger quantity is supplied at the same price. An increase in supply is caused by factors such as decrease in the factor prices, advancement in technology, favourable government policies, etc. The increase in supply is graphically shown in the following figure by parallel rightward shift of the supply curve.



v) Total Revenue ÷ Number of units Sold = Average Revenue.

Explanation:

Average revenue is the revenue earned per unit of output sold. It is equal to total revenue divided by total number of units sold. Algebraically,

$\frac{\mathrm{Total}\mathrm{Revenue}}{\mathrm{Number}\mathrm{of}\mathrm{Units}\mathrm{Sold}}=\mathrm{Average}\mathrm{Revenue}$