Question 1 Report
Which of the following changes is most likely to shift a market supply curve for bread to the right?
A an increase in the price of bread
B a fall in the price of flour
C an increase in consumers' incomes
D a successful advertising campaign by a bakery
(a) Which option is correct? [1]
(b) Explain how this change affects a bakery's costs and supply. [2]
(a) A fall in the price of flour is the correct change. Flour is an input used to produce bread, so its price changes firms’ costs and therefore market supply. A change in the price of bread causes a movement along the supply curve, while incomes and advertising mainly affect demand. [1]
(b) Flour is a production cost for bakeries. When flour becomes cheaper, the cost of making each loaf falls. [1] Bread can then be supplied profitably at lower prices, or firms can profitably supply more at every given price. Market supply therefore increases, shown by a rightward shift of the supply curve. [1]
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