How are the following events likely to affect the market supply of rice in an economy?
a) A fall in the wage rate of farm labor
b) An increase in the productivity of farm capital due to better technology
c) An increase in the use of agricultural
land for non-agricultural purposes
a) A fall in the wage rate of farm labor will lower the cost of producing rice, allowing farmers to supply more at the same market price. As such there will be an increase in the supply of rice, and this will be represented by a right shift in the market supply curve.
b) An increase in the productivity of farm capital implies a fall in the cost of production. This will allow farmers to supply more at a given price. This will be represented by a right shift in the market supply curve for rice.
c) An increase in the use of agricultural land for non-agricultural purposes will imply a fall in the scale and size of producers. As such there will be a decrease in the supply of rice, and this will be represented by a left shift in the market supply curve of rice.
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