Due to rise in the price of a substitute goods in production the supply curve of a goods :

Question

Accepted Answer

The correct option is 2: Shifts to the left.

In production economics, substitute goods in supply are two goods that can be produced using the same resources by a producer. For example, a farmer can use their land and labor to grow either wheat or corn. When the price of one substitute good rises, the producer will find it more profitable to shift their resources towards producing that good and away from the other. In this case, if the price of a substitute good increases, the producer's profit motive dictates they will allocate more resources to the substitute good and fewer resources to the original good, leading to a decrease in the supply of the original good at every possible price. A decrease in supply, caused by a non-price factor like the price of a related good, is represented graphically as a shift of the entire supply curve to the left.

The incorrect option is 1: Shifts to the right.
A shift to the right indicates an increase in supply. This would only happen if the price of a substitute good in production decreased (making the original good relatively more profitable) or due to favorable changes like lower input costs or technological improvements.

The incorrect option is 3: Remains same.
The supply curve would only remain the same if the price change occurred for the good itself, causing only a movement along the curve, or if the change in the substitute's price had no bearing on the production decision, which contradicts the concept of substitute goods in supply.

The incorrect option is 4: Upward movement takes place on supply curve.
An upward movement along the existing supply curve (an extension of supply) occurs exclusively when the price of the good itself increases, assuming all other factors remain constant. It does not reflect a change in non-price determinants, such as the price of a substitute input.