Factors of Supply Cost of Inputs

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Cost of Inputs Inputs are what companies use to produce a good – Examples? – The price of these inputs directly effects the company producing the good – Example: Higher steel prices = more expensive to make a car

Cost of Inputs What does this mean? The higher the cost to produce a good means less goods will be supplied. – It is possible then that the higher cost to produce is then passed on to the consumer Example: higher cost of steel = cars are more expensive to produce = more expensive cars for consumers to buy

Cost of Inputs All together the higher cost of an input will lead to less supply Inversely, lower costs to produce will lead to greater supply! – Example: lower cost of steel = cars are less expensive to produce = more inexpensive cars for consumers to buy

Cost of Inputs What does this mean for our supply curve? – Cost of a factor of production = SHIFT in quantity supplied.

Increased cost of steel on car manufacturer Decreased cost of steel on car manufacturer PricePrice PricePrice Quantity supplied

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