Question

What happens if input prices increase?

• A. The supply curve shifts to the right
• B. The supply curve shifts to the left
• C. The demand curve shifts to the right
• D. The equilibrium price falls

Hint:

An increase in input prices leads to a decrease in supply, which shifts the supply curve to the left, indicating less quantity is supplied at each price level.

Answer 1

The Correct Option is B

When input prices increase, the cost of production rises for businesses. As a result, producers are willing to supply less at the existing price level because their production becomes more expensive. This leads to a shift in the supply curve to the left, indicating a decrease in supply at every price level.
This is a typical response in microeconomic theory where higher input costs reduce the willingness and ability of producers to supply goods and services.
Therefore, the correct answer is that the supply curve shifts to the left.