📚 Learning Guide
Impact of Input Costs on Supply
hard

If the input cost of fabric for making bandanas decreases, the supply of bandanas will likely __________, leading to a potential decrease in their market price.

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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

B

decrease

C

stabilize

D

fluctuate

Understanding the Answer

Let's break down why this is correct

Answer

If the cost of fabric used to make bandanas goes down, it means that manufacturers can produce bandanas for less money. When production costs decrease, it becomes easier for companies to make more bandanas because they can earn a profit even at lower prices. As a result, the supply of bandanas will likely increase because more businesses will want to produce and sell them. This increase in supply can lead to a decrease in the market price of bandanas since there will be more available for consumers to buy. For example, if a bandana costs $5 to make and the fabric cost drops, companies might sell it for $3, making it more affordable for everyone.

Detailed Explanation

When the cost of fabric goes down, it becomes cheaper to make bandanas. Other options are incorrect because Some might think that lower costs mean less supply; Stabilizing means no change, but lower costs usually lead to more supply.

Key Concepts

Impact of Input Costs on Supply
Supply and Demand Dynamics
Consumer Surplus
Topic

Impact of Input Costs on Supply

Difficulty

hard level question

Cognitive Level

understand

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