📚 Learning Guide
Impact of Input Costs on Supply
easy

How does an increase in input costs typically affect the elasticity of supply for a product?

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Learning Path
Learning Path

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Choose the Best Answer

A

It makes supply more elastic

B

It makes supply less elastic

C

It has no effect on elasticity

D

It varies depending on the product

Understanding the Answer

Let's break down why this is correct

Answer

When input costs increase, it usually becomes more expensive for producers to make their products. This can lead to a decrease in supply because some producers might not be able to afford to produce as much or might decide to stop producing altogether. The elasticity of supply measures how much the quantity supplied changes when prices change. If input costs rise significantly, the supply becomes less elastic, meaning that even if prices go up, producers may not increase their output as much as they would have before the cost increase. For example, if a bakery faces higher flour prices, it may not be able to bake as many loaves of bread, even if the selling price of bread goes up.

Detailed Explanation

When input costs go up, producers find it harder to change how much they supply. Other options are incorrect because Some might think higher costs mean producers can supply more easily; It's a common mistake to think costs don't matter.

Key Concepts

elasticity of supply
Topic

Impact of Input Costs on Supply

Difficulty

easy level question

Cognitive Level

understand

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