1.
2) (8 points) An increase in the price of a product (P), along with an increase in the price of an
input factor (P I
), is certain to lead to an increase in quantity supplied (Q S
). Indicate whether
you believe the statement is True or False , and then briefly explain your answer.
Solution
The Answer is True
If you increase the price of the product with increase in input factors, There is surely increase in
quantity that can be supplied, but there is also one problem The demand for the quantity may
also decrease,
If inputs are increased there is surely an increase in the network, resources and supply chain this
will increase the number of quantity that can be supplied. This has happened with almost many
manufacturing companies. In general manufacturing companies which do not have excess
capacity can supply particular quantity at lower price and if the quntity increase the price also
increases due to rise in input costs. This is particulary true in some places where slabs in power
consumption and taxes are present. Thus the statement holds true