When there is a increasing cost of production leading today substantial cut in production equilibrium price will fall
True / False
Experts pls give me the reason also
Dear student,
The given statement is false as with the increasing production leading substantial cut in production, the equilibrium price will increase and thus, the supply curve will shift to the left.
This is because a rise in price of factor input discourages producers and they decrease their supply. It causes in excess demand and there is competition among buyers to buy more goods even at higher price. It results into contraction in demand. On the other hand a rise in price results into expansion of supply and thus, it has resulted into a higher equilibrium price and lower equilibrium quantity.
Regards
The given statement is false as with the increasing production leading substantial cut in production, the equilibrium price will increase and thus, the supply curve will shift to the left.
This is because a rise in price of factor input discourages producers and they decrease their supply. It causes in excess demand and there is competition among buyers to buy more goods even at higher price. It results into contraction in demand. On the other hand a rise in price results into expansion of supply and thus, it has resulted into a higher equilibrium price and lower equilibrium quantity.
Regards