When some goods or productive factors are completely fixed in amount, regardless of price, the supply curve is
- A.horizontal
- B.downward sloping to the right
- C.vertical
- D.upward sloping to the right
Correct answer
Explanation
The correct answer is C, vertical. If the quantity of a good or factor cannot change, the same amount is supplied whatever the price, so the supply curve is a vertical line at that quantity. Such supply is called perfectly inelastic, and its elasticity of supply is zero. A common example is land: the total area of a region is fixed, and a higher rent cannot create more of it. The paintings of an artist who has died, or the seats in a stadium on match day, behave the same way in the short run. Option A is wrong because a horizontal supply curve shows perfectly elastic supply, where any amount is offered at one price. Option B is wrong because a supply curve sloping downward to the right would mean less is offered at higher prices, which is not the normal case. Option D is wrong because an upward-sloping curve is ordinary supply, where higher prices bring more output to the market. Exam tip: fixed supply gives a vertical curve with elasticity zero; perfectly elastic supply is horizontal.
Practice Questions
View allAmong the agricultural commodities imported by India, which one of the following accounts for the highest imports in terms of value in the last five years?
- A.Spices
- B.Fresh fruits
- C.Pulses
- D.Vegetable oils
Show answer
Edible vegetable oils are India's largest agricultural import by value, and they have stayed at the top since well before this question was set.
Read the full explanation →'Broad-based Trade and Investment Agreement (BTIA)' is sometimes seen in the news in the context of negotiations held between India and
- A.European Union
- B.Gulf Cooperation Council
- C.Organization for Economic Cooperation and Development
- D.Shanghai Cooperation Organization
Show answer
The Broad-based Trade and Investment Agreement was the name given to the free trade agreement that India and the European Union began negotiating in 2007.
Read the full explanation →Consider the following statements : 1. Purchasing Power Parity (PPP) exchange rates are calculated by comparing the prices of the same basket of goods and services in different countries. 2. In terms of PPP dollars, India is the sixth largest economy in the world. Which of the statements given above is/are correct?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
Show answer
Statement 1 is the definition of purchasing power parity, while statement 2 understates India's position. A PPP exchange rate is the rate at which the currency of one country would have to be converted into that of another to buy the same basket of goods and services in both.
Read the full explanation →What is/are the most likely advantages of implementing 'Goods and Services Tax (GST)'? 1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India. 2. It will drastically reduce the 'Current Account Deficit' of India and will enable it to increase its foreign exchange reserves. 3. It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future. Select the correct answer using the code given below :
- A.1 only
- B.2 and 3 only
- C.1 and 3 only
- D.1, 2 and 3
Show answer
The main and certain advantage of GST is that it subsumes many indirect taxes into one and creates a common national market.
Read the full explanation →Which one of the following is not a strategy in the Rainfed Area Development (RAD) scheme of India?
- A.Diversified farming
- B.Soil health management
- C.Adaptation of cluster-based approaches
- D.Optimizing canal irrigation
Show answer
Rainfed Area Development is meant for farms that depend on rain, not on canals, so improving canal irrigation is not one of its strategies.
Read the full explanation →