Final answer:
When supply increases, with demand being constant, the price typically decreases due to market surplus. The cost of production is a separate factor that can lead to an increase in price, but is not directly related to changes in supply volume.
Step-by-step explanation:
When supply increases, generally the price of a product tends to decrease. This is because an increase in supply, assuming demand remains constant, creates a surplus in the market. The surplus puts downward pressure on prices as sellers compete to attract buyers. If the cost of production increases, this is separate from the effect of supply increase on price; higher production costs would typically lead to higher prices to maintain profit margins. However, as a response to the original question, when considering only an increase in supply, we expect to see prices decrease as a result.
Interpreting the provided Graph 1, which shows a rightward shift in the supply curve, further supports this principle. An overall increase in the level of supply affects the market by lowering the price and increasing the quantity supplied. This can be explained by basic principles of supply and demand where increased supply leads to lower prices when other factors are held constant.