Demand, Supply and How Markets Work: Question 7

Worked solution

Part (a): Determinants of supply

Besides the price of strawberries themselves, the market supply curve for strawberries could shift because of a change in:

• the costs of production. For example fertiliser, labour, or the rent paid for farmland
• the technology used to grow and harvest the crop

(Other acceptable answers include natural factors such as weather, government taxes or subsidies, the number of farms supplying the market, or the price of other crops those farms could grow instead.)

Part (b): A rightward shift caused by new technology

The automated irrigation and harvesting system lets the farm produce more strawberries without any rise in its costs, in effect, it lowers the cost of producing each punnet of strawberries. This is a change in a determinant other than the price of strawberries, so it is a shift of the supply curve, not a movement along it.

Reasoning through the effect:

1. The same inputs now produce a bigger crop, so the cost per punnet falls.
2. Growing strawberries becomes more profitable at every possible selling price.
3. The farm is therefore willing and able to supply more strawberries at every price.

This means the supply curve for strawberries shifts to the right: supply has increased.

Part (c): A leftward shift caused by weather damage

This time the price of strawberries has not changed. Instead, heavy rainfall has damaged plants across the whole growing region. A change in growing conditions is a non-price determinant of supply, so it shifts the whole supply curve rather than moving farms along it.

Reasoning through the effect:

1. Damaged plants across the region produce a smaller crop than before.
2. Farms across the market have fewer strawberries available to sell at any given price.
3. Farms are therefore willing and able to supply fewer strawberries at every price than before.

This means the supply curve for strawberries shifts to the left: supply has decreased.

Final answers

• (a) Any two of: costs of production; technology; natural factors/weather; government taxes or subsidies; the number of farms; the price of other crops.
• (b) The supply curve shifts to the right (supply increases), because the new technology lowers production costs at every price.
• (c) The supply curve shifts to the left (supply decreases), because rainfall damage to plants across the region reduces the quantity farms can supply at every price.