Other things remaining constant, a rise in the price of an input used in production increases the ________ of the firms, so the market supply curve shifts to the left.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → marginal cost
A dearer input makes each unit of output cost more to produce, so the firms’ marginal cost rises. Firms then supply less at each price, and the supply curve shifts left.
Demand does not depend on input prices, so the demand curve stays where it is.
NCERT (2026-27): “Supply Shift … Let us consider a situation where 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. Hence, the supply curve shifts leftward. In the Figure 5.3(a), this is shown by a shift in the supply curve from SS0 to SS2. But this increase in input price has no impact on the demand of the consumers since it does not depend on the input prices directly. Therefore, the demand curve remains unchanged. In Figure 5.3(a), this is shown by the demand curve remaining unchanged at DD0. As a result, compared to the old equilibrium, now the market price rises and quantity produced decreases.” |