Practicing Success
Practicing Success
CUET Preparation Today
| Let us consider a situation where a market for electricity is already in equilibrium. All other things remaining constant, there is an increase in the price of coal used in the production of electricity. What will be the effect on the equilibrium price? |
Remains constant Increases Decreases Can increase or decrease |
| Increases |
| In this situation, all other things remaining constant, there is an increase in the price of an input used in the production of a commodity. This will increase the marginal cost of production of the firms using this input. Therefore, at each price, the market supply will be less than before. The demand curve remains unchanged. As a result, compared to the old equilibrium, now the market price rises. |
