📚 Learning Guide
Impact of Input Costs on Supply
easy

How do increasing input costs typically affect the supply of a product?

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

Increase supply

B

Decrease supply

C

No effect on supply

D

Supply becomes more elastic

Understanding the Answer

Let's break down why this is correct

Answer

When the costs of inputs, like materials or labor, go up, it usually becomes more expensive for producers to make their products. This means that some companies might decide to produce less because they can't afford to make as much at the higher costs. For example, if a bakery has to pay more for flour and sugar, it might choose to bake fewer cakes because the profit from selling them is reduced. As a result, the overall supply of cakes in the market could decrease. This change in supply can lead to higher prices for consumers, as there are fewer cakes available to buy.

Detailed Explanation

When the costs to make a product go up, companies usually make less of it. Other options are incorrect because Some might think higher costs mean more supply; It's a common mistake to think costs don't change supply.

Key Concepts

input costs
Topic

Impact of Input Costs on Supply

Difficulty

easy level question

Cognitive Level

understand

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