Explain the effect of the following on market supply of a good:
       (a) An increase in input price.
       (b) Reduction in per unit tax.

Dear student,

An increase in input price leads to fall in market supply as in increase in input price will increase the cost of production which will discourage supplier to produce goods, hence, it will lead to fall in supply.

Reduction in per unit tax will lead to increase in supply as reduction in tax will ultimately leads to fall in price of commodity which will in turn increase supply.


  • 1
(a) Supply of the commodity falls/decreases.
(b) Supply of the commodity rises/increases.
  • 3
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