📚 Learning Guide
Impact of Input Costs on Supply
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If the cost of ingredients for making pizza decreases, then the supply of pizza will increase: A:B :: C:?

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Learning Path

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Choose the Best Answer

A

Demand for pizza will decrease

B

Price of pizza will increase

C

Consumer surplus will potentially increase

D

Quantity of pizza sold will stay the same

Understanding the Answer

Let's break down why this is correct

Answer

When the cost of ingredients for making pizza goes down, pizza makers can produce more pizzas because it costs them less to make each one. This means they are willing to supply more pizzas to meet demand, as they can still make a profit even at lower prices. For example, if cheese and flour become cheaper, a pizzeria can make more pizzas without raising prices, attracting more customers. In this case, if A is the cost of ingredients and B is the supply of pizza, then C would be the demand for pizza. So, if the cost of ingredients decreases (A), the supply of pizza increases (B), which can lead to an increase in demand for pizza (C).

Detailed Explanation

When the cost to make pizza goes down, more pizzas can be made. Other options are incorrect because Some might think that if prices drop, fewer people want pizza; It's a common mistake to think lower costs lead to higher prices.

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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