CIPS Level 4 Diploma in Procurement and Supply L4M5 Question # 31 Topic 4 Discussion
L4M5 Exam Topic 4 Question 31 Discussion:
Question #: 31
Topic #: 4
When prices of input materials increase, supply curve shifts to the left while demand remains stable. The shift of supply will tend to cause which of the following?
A.
An increase in the equilibrium price and quantity
B.
A decrease in the equilibrium price and quantity
C.
A decrease in the equilibrium price and an increase in the equilibrium quantity
D.
An increase in the equilibrium price and a decrease in the equilibrium quantity
The equilibrium price initially at P0 with quantity Q0, when supply curve shifts to the left, it will converge with demand curve at new equilibrium point with price P1 and quantity Q1. As you can see from the graph, P1 is greater than P0 and Q1 is smaller than Q0.
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