Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The supply of bandanas will increase, leading to a decrease in market price and an increase in consumer surplus.
B
The quantity of bandanas supplied will decrease, causing prices to rise and consumer surplus to diminish.
C
The supply of bandanas will remain unchanged, but the demand will decrease due to consumer expectations.
D
The cost decrease will lead suppliers to produce higher quality bandanas, resulting in higher prices.
Understanding the Answer
Let's break down why this is correct
Answer
If the cost of fabric decreases significantly, the supply of bandanas is likely to increase. This happens because producers can make bandanas at a lower cost, allowing them to produce more without raising prices. For example, if a bandana costs $2 to make instead of $3, manufacturers may decide to make twice as many because they can earn more profit. As a result, the increased supply can lead to lower prices for consumers, making bandanas more affordable. Overall, lower input costs typically encourage more production in the market.
Detailed Explanation
When the cost of fabric goes down, it becomes cheaper for producers to make bandanas. Other options are incorrect because This option suggests that less fabric means fewer bandanas, which is the opposite of what happens when costs drop; This choice says the supply stays the same, but lower costs usually encourage more production.
Key Concepts
Impact of Input Costs on Supply
Supply and Demand Dynamics
Consumer Behavior
Topic
Impact of Input Costs on Supply
Difficulty
medium level question
Cognitive Level
understand
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