Forums Economics Assignment Help GCSE Explain effect on equilibrium market price of an increase in production costs

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    nammy
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    Explain one possible effect on the equilibrium market price of an increase in production costs for firms.

    #16067
    nammy
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    Answer:
    If production costs increase, the supplier bears increasing costs for each quantity level. Keeping everything else constant, the increase in production costs of the firms will make the market supply curve move inwards. The supplier will supply less at each quantity level.

    Thus, the equilibrium markets price increases and the quantity of the good decreases because less is supplied in the market now.

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