Answer to Question #322532 in Microeconomics for Mulweli G

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.

Answer 1

An increase in the cost of the sunflower seeds will make the sunflower seeds suppliers increase their supply price. The increase in the supply price will increase the cost incurred in producing sunflowers. This will consequently lead to an increase in the output price (sunflower). In the long run, the prices of sunflower used to make oil will increase in the market. The price increase will decrease the quantity demanded by the sunflower customers. However, there will be a surplus of the sunflower in the market, but the number of buyers will be few. Therefore an increase in the cost of sunflower seeds causes a ripple effect in the market.