Given a supply curve for ultrasound clinics predict how the

Given a supply curve for ultrasound clinics, predict how the supply curve will shift (i.e., increase or decrease) in each of the following situations (justify your prediction in each case).

a.The technology used for ultrasound equipment has a breakthrough that dramatically lowers the cost of the ultrasound machine.

b.The wages of the clinic’s support staff are increased.

c.New ultrasound equipment reduces patient examination times.

d.Local utility rates increase.

Solution

ans a.If the cost of the machine is lowered then the provision of the service will also become cheap. Thus, the supply curve for the ultrasound service will shift to the right.

justification:At any prevailing price, there will be more number of services provided. Thus, with an technological change, the cost of provision of the service will decrease and the supply curve will shift to the right.

ans b.The supply curve for the service will shift to the left .

justification:The wages of the clinic’s support staff are increased. If the wages of the clinic’s staff are increased, then the cost of operating the ultrasound services will increase.as at any price, the number of services provided will be lesser.

ans c.The supply curve for ultrasound services will shift to the right.

justification:New ultrasound equipment reduces patient examination times. With the new equipment, the time required to examine each patient decreases, thus more number of patients can be observed in the same time duration.

ans d. The supply curve will shift to the left.

justification:Local utility rates increase. If the local utility rates increase, then the cost of providing the service increases. Thus the supply curvewill shift to the left.