Question

A decrease in the market demand for a product combined with a rise in prices of inputs with cause which of the following in the short run?

a.an increase in market quantity
b a decrease in market quantity
c no change in market quantity
d one cannot tell B Save Unanswered

Answer 1

In the short run, a decrease in the market demand for a product combined with a rise in input prices is likely to lead to a decrease in market quantity supplied.

Step-by-step explanation:

Impact of Market Demand and Input Prices on Market Quantity

• When analyzing market dynamics in business economics, a decrease in the market demand for a product combined with a rise in the prices of inputs may lead to a few outcomes. In the short run, businesses may be unable to quickly adjust their production levels. Yet, the increased cost of producing goods will likely result in a decrease in the willingness or ability of firms to supply these goods at the previous quantities, especially if the market demand is simultaneously falling.

Generally, a decrease in demand will lead to businesses lowering production to avoid surplus. Furthermore, rising input costs make production less profitable, reinforcing the incentive to reduce output. Thus, it is reasonable to expect that the result of these combined factors would be a decrease in market quantity supplied in the short run.