Elective microeconomics for business

microeconomics for businessTU Board 2082

State the factors causing leftward shift of supply curve of an apple farm.

2

Answer

The leftward shift of the supply curve of an apple farm occurs due to the following factors:

Current PeriodCurrent Supply(S₁) – Farmers hold baFuture PeriodExpected HigherSupply (S₂) if prices
Farmers reduce current supply (S₁ → S₂) when anticipating higher future prices, causing a leftward shift.
020406080Normal Year80Drought Year40Flood Year50Apple Yield (tons per hectare)
Impact of adverse weather on apple farm output (showing reduced supply).
Quantity of Apples (in thousands)Price per kg ($)OOriginal Supply (S₁)Shifted Supply (S₂)E₁Q₁P₁E₂Q₂P₂
Leftward shift of supply curve (S₁ → S₂) due to higher production costs, adverse weather, or other factors listed.
  1. Increase in Production Costs: Higher costs of inputs such as labor, fertilizers, or irrigation reduce profitability, leading farmers to supply fewer apples at every price level.

  2. Adverse Weather Conditions: Unfavorable weather like droughts, floods, or frost damages crops, reducing the quantity of apples available for sale.

  3. Technological Regression: Outdated farming techniques or lack of innovation lower productivity, decreasing supply.

  4. Government Policies: Taxes, subsidies removal, or regulations (e.g., land-use restrictions) can discourage production, shifting supply left.

  5. Expectation of Higher Future Prices: If farmers anticipate better prices later, they may hold back supply now, reducing current market offerings.

  6. Reduction in Number of Sellers: Fewer apple farms (due to exit of producers) decrease total market supply.

  7. Natural Disasters: Events like pests, diseases, or soil degradation harm apple cultivation, limiting output.

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