Saved Bookmarks
| 1. |
Explain how changes in prices of inputs influence the supply of a product. |
|
Answer» Change in price of raw material and remuneration of factors (rent, wages, interest, etc.) influence the cost of production of a commodity and thereby supply. Suppose, when prices of inputs fall, cost falls. Price of the product remaining unchanged fall in cost of production leads to rise in profits. Rise in profit induces the producer to supply more. Similarly, a rise in prices of inputs will lead to fail in supply. |
|