Explain how input prices are a determinant of supply of a good buy a firm

In case of increase in input price, cost of production tends to rise. Accordingly, producers will supply less of the commodity at its existing price as there is a decrease in producer?s profit.
On the other hand, in case of fall in the prices of inputs, the cost of production tends to fall, leading to an increase in producer?s profit. This induces him to increase his supply.

  • 2
What are you looking for?