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Brownie producers expect the cost of their raw materials to increase in 4 months. What happens in the market for the supplier today? What changes: S or Qs?

a) Supply (S) increases
b) Supply (S) decreases
c) Quantity supplied (Qs) increases
d) Quantity supplied (Qs) decreases

1 Answer

2 votes

Final answer:

Expectation of increased costs for raw materials in the future leads to a decrease in supply (S) today, represented by a leftward shift in the supply curve, not an immediate change in quantity supplied (Qs).

Step-by-step explanation:

When brownie producers expect the cost of their raw materials to increase in 4 months, the market for the supplier today is likely to change in anticipation of these costs. If raw material costs will be higher in the future, this could potentially increase the cost of production, leading to reduced profitability at each price point.

With anticipation of increased costs, producers may be less willing to supply at each price level, which means the supply curve will shift to the left, indicating a decrease in supply (S). This scenario does not change the quantity supplied (Qs) today, because Qs refers to the actual production at this moment, not the future production plans or expectations. Therefore, the correct answer to the student's question is: b) Supply (S) decreases.

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