If input prices increase, all else equal, (a) quantity supplied will decrease (b) supply will increase (c) supply will decrease (d) demand will decrease

Marketing Jan 12, 2021

If input prices increase, all else equal,

(a) quantity supplied will decrease

(b) supply will increase

(d) demand will decrease

Expert Solution

The correct answer is -

Option (A) Quantity supplied will decrease

Explanation -

Since all other factors are equal, the price of the product remains the same even after the increase in input price. The result is that companies making the product witness margin contraction due to higher input price with sales price remaining the same. Therefore, firms has lesser incentive to produce the product and sell in the markets. This translates into a decline in supply with demand remaining the same.

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