Final answer:
A decrease in the price of inputs would cause the supply curve to increase from S₁ to S₃.
Step-by-step explanation:
An increase in the price of inputs would cause the supply curve to increase from S₁ to S₃. A rise in the price of inputs, such as raw materials or labor, increases the cost of production for firms. As a result, firms are less willing to supply the same quantity of goods at any given price. This leads to a leftward shift in the supply curve, resulting in a decrease in supply. Therefore, option A is incorrect.
Higher expected future prices do not directly impact the supply curve. Expectations of future prices may influence producers to hold back supply and wait for higher prices in the future, but it does not cause the supply curve to shift. Therefore, option B is incorrect.
A decrease in the price of inputs reduces the cost of production for firms. This makes it more profitable for firms to produce and supply goods at any given price. As a result, the supply curve shifts to the right, indicating an increase in supply. Therefore, option C is correct.
A decrease in the number of firms in the market does not directly impact the supply curve. While a decrease in the number of firms may limit the overall supply in the market, it does not cause the supply curve to shift. Therefore, option D is incorrect.