A supply curve does all of the following, except:
Answer
Uses the ceteris paribus assumption.
Holds constant time, place, income, costs of inputs, costs of substitutes, and suppliers' expectations about future prices.
Shows the quantity producers are willing and able to supply at each price.
Shows consumers' marginal benefit for each unit produced.
Shows the opportunity cost to consumers over various quantities.
shows consumer's marginal benefit for each unit produced
To determine which of the options is incorrect, let's go through each option and explain its relevance to a supply curve.
1. "Uses the ceteris paribus assumption": The ceteris paribus assumption is a fundamental concept in economics that means "all other things being equal." The supply curve assumes that all factors except price remain constant. This assumption allows economists to isolate the relationship between price and quantity supplied.
2. "Holds constant time, place, income, costs of inputs, costs of substitutes, and suppliers' expectations about future prices": This statement is accurate. When constructing a supply curve, economists assume that factors such as time, place, income, input costs, substitute costs, and suppliers' expectations about future prices remain constant. This assumption helps to isolate the impact of price changes on the quantity supplied.
3. "Shows the quantity producers are willing and able to supply at each price": This statement is also true. The supply curve represents the quantity of a good or service that producers are willing and able to supply at each price, assuming all other factors are held constant.
4. "Shows consumers' marginal benefit for each unit produced": This statement is incorrect. The supply curve does not show consumers' marginal benefit. Instead, it represents producers' willingness to supply a good or service at different prices. Consumers' marginal benefit is usually represented by demand curves.
5. "Shows the opportunity cost to consumers over various quantities": This statement is incorrect as well. The supply curve does not represent the opportunity cost to consumers. Rather, it represents the trade-off faced by producers in allocating their resources to produce a given quantity of a good or service at different prices.
Given the explanations above, the option that is incorrect is:
- "Shows consumers' marginal benefit for each unit produced."