What will happen in this 7 no

What will happen in this 7 no Explain the law of diminishing utility, with the help of a hypothetical schedule. Elaborate the law ordemand, with the help Of a hypothetical schedule. The market for a good is in equilibrium. How would an increase in an input price affect the equilibrium price and equilibrium quantity, keeping other factors constant ? Explain using a diagram.

Dear Student
Effect of Increase in Input Price
A change in the cost of production i.e. prices of the factors of production negatively affects the supply of the firm. A rise in the input prices (such as, rise in wages, rise in price of raw materials) will lead the average cost to increase, which simultaneously is accompanied by an upward (leftward) shift of the MC curve. This implies that for positive levels of output (i.e. when the price is greater than or equal to minimum of the AC curve), the supply curve will also shift upwards (leftwards) and at a given market price level, firm cuts down its supply. Thus , Increase in input prices will have negative impact on supply provided other things remaining constant.

Effect on Equilibrium Price and Quantity
As the supply will decrease and the cost of production will increase which will result in increase in equilibrium price and decrease in equilibrium quantity.

Supply of product shifts from S1 to S2.

Regards
 

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