Question

How do the equilibrium price and the quantity of a commodity change when price of input used in its production changes?

Answer 1

The equilibrium price will increase with the increase in the price of input and there will be a decrease in the quantity of the product.

This will be because when the production cost increases, the price of the final product will also increase as the production cost and final price are directly proportional to each other.

If the final price increases, it will definitely affect the sale of the product. Increase in price of the product will decrease its demand if the product is of not daily use or important use. But the increase in the price of a product will not affect its demand if the product is of daily use.