Question

State whether the following statement is TRUE and FALSE.

If price falls, the supply curve will shift to left.

Options

• True

• False

Answer 1

 If price falls, the supply curve will shift to left. - False

Explanation:
The above statement is incorrect. Other things remaining constant, a fall in price leads to a fall in supply. Such a fall in supply is known as contraction in supply. It is shown by a downward movement along the same supply curve. On the other hand, a parallel leftward shift of the supply curve represents that the supply falls as a result of change in factors other than price.