Final answer:
If the price of rubber rose by 50 percent, there would be a short-term impact on output prices. Assuming that rubber is a major resource, the increased cost of rubber would likely lead to an increase in the cost of producing goods that rely on rubber as an input.
Step-by-step explanation:
If the price of rubber rose by 50 percent, there would be a short-term impact on output prices. Assuming that rubber is a major resource, the increased cost of rubber would likely lead to an increase in the cost of producing goods that rely on rubber as an input.
As a result, producers may have to raise the prices of their products to maintain profitability. For example, if a car manufacturer uses rubber in the production of tires, the increased cost of rubber would likely lead to an increase in the price of cars.
However, the extent of the impact on output prices depends on the price elasticity of demand for the final goods. If the demand for the final goods is highly elastic, meaning that consumers are very responsive to changes in price, producers may have limited ability to pass on the higher costs to consumers. On the other hand, if the demand for the final goods is inelastic, meaning that consumers are less responsive to changes in price, producers may have more ability to raise prices.