📚 Learning Guide
Impact of Input Costs on Supply
easy

If the cost of fabric decreases, what is the most likely effect on the supply of bandanas?

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Learning Path

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Choose the Best Answer

A

Increase in supply, leading to lower prices

B

Decrease in supply, leading to higher prices

C

Supply remains unchanged, but prices increase

D

Supply decreases, leading to no change in prices

Understanding the Answer

Let's break down why this is correct

Answer

When the cost of fabric decreases, it becomes cheaper for manufacturers to produce bandanas. This lower cost means that they can make more bandanas without spending as much money, which often leads to an increase in supply. For example, if a company used to pay $5 for fabric to make one bandana and now only pays $3, they might decide to produce more bandanas because they can save money and still make a profit. As a result, we would likely see more bandanas available in stores. Overall, when the cost of an important material goes down, it usually encourages producers to supply more of the product.

Detailed Explanation

When fabric costs less, it is cheaper for makers to produce bandanas. Other options are incorrect because Some might think lower costs lead to less supply; This option suggests that supply stays the same.

Key Concepts

Input Costs
Supply
Market Dynamics
Topic

Impact of Input Costs on Supply

Difficulty

easy level question

Cognitive Level

understand

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