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suppose the cost of the fabric used to make the bag increases. Show what happenson the graph and label the new price (P1) and the new quantity (Q1).

User Mardon
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1 Answer

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Final answer:

When the cost of making a product such as a bag increases due to higher fabric prices, the supply curve on a graph will shift leftward to represent a decrease in the quantity supplied at all price levels, resulting in a new equilibrium price and quantity, labeled as P1 and Q1 respectively.

Step-by-step explanation:

The scenario described involves an increase in the cost of the raw material (fabric) used to manufacture a product (a bag). This cost increase can be illustrated in a supply and demand graph where the supply curve shifts to the left. The initial supply curve, let's call it S0, represents the original supply conditions. After the increase in fabric costs, the new supply curve, which we'll label as S1, will reflect a lower quantity supplied at all price levels. This is because the producers are less willing or able to supply the same quantity at the previous prices due to higher production costs.

To graphically show this change on a supply and demand diagram, you follow these steps: Begin at the initial point on the S0 curve at the existing price level. Since the cost to produce the bags has increased, you'll then shift the supply curve left to the new position, S1. This leftward shift indicates a decrease in supply. At the same initial price level, draw a vertical line up to the new supply curve S1 and label that point as P1. This shows the new, higher price level that balances the decreased supply with the existing demand. Then, draw a horizontal line from this point to the y-axis to indicate the new quantity supplied at this price, which we can label Q1.

User Xosrov
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