Micro Foundations · intro
What moves on the Supply & Demand diagram
Higher input costs raise the marginal costmarginal costThe cost of producing one more unit. of every unit, shifting supply left.
Start at equilibriumequilibriumThe point where opposing forces balance, quantity supplied equals quantity demanded, so there's no pressure for price to change..
A key input for producers in this market becomes more expensive.
Producing each unit now costs more. S shifts left/up.
New equilibriumequilibriumThe point where opposing forces balance, quantity supplied equals quantity demanded, so there's no pressure for price to change.: higher price, lower quantity.
Examiners ask this as: input costs rise, raw material prices, coffee bean price cafe, flour price bakery, component shortage single market.
Other scenarios on Supply & Demand