Question

use a clearly diagrams to explain the effect to the equilibrium price and quantity of good X if : the cost of producing good x is increased

Answer 1

Answer:

The equilibrium quantity will decline and the price will increase.  

Explanation:

Suppose a firm is producing a Q level of good X and supplying it at the price level P. Now, the cost of producing good X will increase. This means that at the same cost the firm will be able to produce less quantity of good X. The supply curve, as a result, will shift leftwards.  

This new supply curve will intersect the existing demand curve at a higher point E'. At this point the equilibrium price level will increase to P' and the quantity will decrease to Q'.

This is shown in the attached diagram.