Shifts in Supply: Pizza Which direction will the supply curve shift and why, given the following:

a. The price of tomato paste rises You buy a new pizza dough machine that cuts production time in half
b. The government decides pizza has healthful qualities, therefore granting subsidies to all producers
c. Congress heeds a new study that claims pizza causes cancer in lab rats and therefore puts an excise tax on pizza Rumor has it that students at the local college, crazed for pizza, will pay a higher price NEXT MONTH when they get raises at their work-study programs.
d. The pizza business is GOOD! 3 new pizza shops open in your area.

a.The price of tomato paste rises You buy a new pizza dough machine that cuts production time in half

Supply curve will shift to left

Cost of production is high and time management is low so low supply

b.The government decides pizza has healthful qualities, therefore granting subsidies to all producers

Supply curve will shift to right

More supply and demand

c.Congress heeds a new study that claims pizza causes cancer in lab rats and therefore puts an excise tax on pizza Rumor has it that students at the local college, crazed for pizza, will pay a higher price NEXT MONTH when they get raises at their work-study programs.

Supply curve will shift to right because there will be more demand, so you supply more.

d.The pizza business is GOOD! 3 new pizza shops open in your area.

Supply curve shift to left because youre not the only one producing in your area so the supply is less.

Explanation:

In thinking about the factors that affect supply, remember what motivates firms: profits, which are the difference between revenues and costs. Goods and services are produced using combinations of labor, materials, and machinery, or what we call inputs or factors of production. If a firm faces lower costs of production, while the prices for the good or service the firm produces remain unchanged, a firm’s profits go up. When a firm’s profits increase, it is more motivated to produce output, since the more it produces the more profit it will earn. So, when costs of production fall, a firm will tend to supply a larger quantity at any given price for its output. This can be shown by the supply curve shifting to the right.

Take, for example, a messenger company that delivers packages around a city. The company may find that buying gasoline is one of its main costs. If the price of gasoline falls, then the company will find it can deliver messages more cheaply than before. Since lower costs correspond to higher profits, the messenger company may now supply more of its services at any given price. For example, given the lower gasoline prices, the company can now serve a greater area, and increase its supply.

Conversely, if a firm faces higher costs of production, then it will earn lower profits at any given selling price for its products. As a result, a higher cost of production typically causes a firm to supply a smaller quantity at any given price. In this case, the supply curve shifts to the left.

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