Micro

Production & Costs

Medium

Comprehension:

Read the passage carefully and answer the questions based on the passage:

Demand and Technology

Consider the case of a local coffee shop that faces rising demand for its products. In response to the increase in demand, the shop owner decided to increase the price of a cup of coffee. As a result, suppliers in the market respond by increasing their supply, hoping to capitalize on the higher price. If the coffee shop invests in a new espresso machine that makes coffee more efficiently, the cost of producing each cup decreases. This leads to an increase in supply and sell more coffee at the same or lower price, benefiting both the producers and consumers. This cost-reduction technology is helpful in the context of the real world.

In the above paragraph, which factor is affecting the supply of Coffee?

Change in consumer's preference.

Change in price of related goods.

Advancement of technology.

Government policy.

✅ Correct Option: 3

Option 1 -> Change in consumer's preference affects demand for coffee, not supply.

Option 2 -> Change in price of related goods primarily affects demand or supply of substitute/complementary goods.

Option 3 -> Advancement of technology directly impacts the production capacity and efficiency of coffee supply.

Option 4 -> Government policy affects supply through regulations, but is not the factor mentioned in the context.

Hence, Advancement of technology -> Technology improvements allow producers to increase production efficiency, reduce costs, and expand output capacity. This directly shifts the supply curve to the right, increasing the overall supply of coffee in the market. -> correct

Question 41

Which of the following is an example of Cost-Reduction Technology in a business?

Question 42

In Microeconomics, what does supply refer to?

Question 44

What is the main purpose of Cost Reduction Technologies in business?

Question 45

How does an increase in price affect supply?

In the above paragraph, which factor is affecting the supply of Coffee?

Solution

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CUET Economics Past Year Questions (Topic-Wise)