Interpreting Supply Curve Shifts

Steps:

• Identify S1 as a 45-degree line, indicating equal responsiveness of quantity supplied to price changes.
• Compare S2 to S1: if S2 is steeper, it shows less elasticity; if flatter, more elasticity.
• Analyze the shift direction: rightward for increase in supply, leftward for decrease.
• Determine the economic implication based on the diagram's labels and positions.

Why D is correct:

• D correctly identifies the shift as an increase in supply, per the law of supply where a rightward move reflects lower costs or more producers.

Why the others are wrong:

• A misinterprets the slope as demand, not supply elasticity.
• B confuses the shift with a movement along the curve.
• C wrongly labels S2 as inelastic without slope evidence.

Not enough information on exact choices or diagram details.

Final answer: D