Question

What happens if input prices increase?

• A. The supply curve shifts to the right
• B. The supply curve shifts to the left
• C. The demand curve shifts to the right
• D. The equilibrium price falls

Hint:

An increase in input prices leads to a decrease in supply, which shifts the supply curve to the left, indicating less quantity is supplied at each price level.

Answer 1

The Correct Option is B

A rise in input prices escalates production costs for businesses. Consequently, producers will offer less at the current price because their manufacturing becomes costlier. This precipitates a leftward shift of the supply curve, signifying a reduction in supply across all price points. This exemplifies a standard microeconomic principle: elevated input expenses diminish producers' inclination and capacity to furnish goods and services. Hence, the supply curve's movement to the left is the accurate outcome.