Answer to Question #318155 in Microeconomics for ernest

Question

The cost of sunflower seeds has increased. Sunflower seeds are an input when sunflowers are produced. Explain verbally how this change will affect the market for sunflowers, You are allowed to use a diagram to explain your answer,

Answer 1

An increase in the cost of sunflower seeds leads to an increase in the cost of production. An increase in the cost of supply leads to an increase in the price of sunflowers, which is the end product. An increase in price leads to a decrease in demand for the commodity due to its high cost. The supply will be equally high due to profit maximization.

A decrease in supply for sunflowers shifts the supply curve to the left S to S¹. Thus a shift in equilibrium price from P to P¹. There is a decrease in quantity demanded Q to Q¹ due to price increase.