An increse in the cost of production, ceteris paribus, will cause?
An increase in the price of a commodity will normally cause a demand to contract. and its been assumed that demand curves only changes when there is a change in a price other things remaining being constant. this assumption is called; Ceteris paribus. i.e. (all other things remaining unchanged)
Thus, if the cost of production has been increased then there will be an increase in the price level too, changing the demand of a product then this will cause Ceteris paribus.
less profitablility unless selling price increases.
lower tax burden (due to less profitability)
higher inflation if the company must raise prices to support the business.
potentially less demand for the final product if prices are raised.
less company expansion, less dividend if available, reduced forecasts, etc.
a shift in supply to the left, as supply decreases, and decrease in quantity demanded(demand did not change though) as the price shifts upwards due to competitive bidding for the item which has a reduced amount.
this leads to a decreased amount at equilibrium price.
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