The Concept Of Shift At Equilibrium
Length: 1 pages (275 Words)
The Concept of Shift at Equilibrium
Assuming that the price of an input F, which is one of the substances employed in the manufacture of the final product A, rises, it follows that the marginal cost of producing product A will also have to reflect this change and rise. The supply curve being upwards sloping determines that the potential sellers that experience high marginal cost can only venture profitably into the production of A if its sale price is high. Thus, a rise in cost on an input in the production of A will result in a leftward shift in supply curve at equilibrium. This translates to less production in A and an increase in its pricing, hence lesser producers in the short term.
Nevertheless, since a buyer’s reservation price is not dependent on the price of the input F, there is no change that shift that will be reflected in the demand curve. Intrinsically, the market is expected to remain the same without necessarily reducing because of the increase in the price of product A. The new price will offset the effects of individual consumers that refuse to buy the
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