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In the pattern of the business cycle, generally: a
In the pattern of the business cycle, generally:
a. costs and prices move inversely.
b. costs and prices move simultaneously.
c. costs lead prices.
d. costs lag behind prices.
Expert Solution
The correct option is c. costs lead prices.
Cost is the input that incurred to form a product or service such as capital, material, labor, and salary or wages of workers. Whereas, price is the amount of money that the buyer spends on a particular product or service.
If the cost incurred in the formation of a product or service is more than the price of that product will be higher. However, if the quantity purchased by the buyer increases, the price tends to decrease due to the lower cost of mass production.
Therefore, the costs lead to the prices.
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