Question 4 - MCQ Questions (1 Mark) - Chapter 1 Class 7 Economics - Introduction to Demand and Supply - Economics

If a new technology is developed that makes it cheaper to produce ice cream, what will happen to the supply of ice cream?

A. The supply of ice cream will increase.

B. The supply of ice cream will decrease.

C. The supply of ice cream will stay the same.

D. It is impossible to say what will happen to the supply of ice cream.

Answer:

Answer by Student

The correct answer is (A): The supply of ice cream will increase .

Detailed Explanation by Teachoo

The supply of a product is how much of it producers are willing to make and sell at different prices. The supply curve is a graph that shows this relationship. The supply curve usually goes up from left to right, meaning that producers are willing to sell more when the price is higher.

Let’s check all the options:

• Option (A) The supply of ice cream will increase -  A new technology that makes it cheaper to produce ice cream will lower the cost of production. This means that producers can make more ice cream with the same amount of money, or make the same amount of ice cream with less money. This will increase the supply of ice cream, which means that more ice cream will be available at lower prices. So, this is correct .
  
  
• Option (B) The supply of ice cream will decrease - A new technology that makes it cheaper to produce ice cream will not increase the cost of production. This means that producers will not have to make less ice cream with the same amount of money, or make the same amount of ice cream with more money. This will not decrease the supply of ice cream, which means that less ice cream will not be available at higher prices. So, this is incorrect .
  
  
• Option (C) The supply of ice cream will stay the same - A new technology that makes it cheaper to produce ice cream will change the cost of production. This means that producers will not have to make the same amount of ice cream with the same amount of money. This will change the supply of ice cream, which means that the same amount of ice cream will not be available at the same prices. So, this is incorrect .
  
  
• Option (D) It is impossible to say what will happen to the supply of ice cream - This is incorrect because we can use the law of supply and the supply curve to predict what will happen to the supply of ice cream when its cost of production changes. The law of supply says that when the cost of production goes down, the quantity supplied goes up, and vice versa. The supply curve shows this relationship graphically. So, this is incorrect .