Keeping other factors constant, a change in the price of input brings…

The correct answer is Option (4) → D, A, C, B

The supply of a good is the quantity firms are willing to sell at each price. Besides the good’s own price, it depends on the cost of production, and so on the prices of inputs such as labour and raw materials. A change in an input price does not move the firm along its supply curve; it shifts the whole curve, because the firm now finds it worth while to offer a different quantity at every price. The effect passes from the input price to cost, from cost to profit, and from profit to the quantity offered:

D. If the price of input falls. — the starting point: an input, such as labour, becomes cheaper.

A. The average cost of production of the commodity reduces. — with cheaper inputs the same output costs less to produce, so average cost and marginal cost fall at every level of output; the MC curve shifts down.

C. The profit per unit of the producer rises. — at the same market price, a lower cost per unit leaves a larger margin of profit on each unit sold.

B. The supply of a commodity increases. — producing more is now worth while at every price, so the firm offers more for sale and the supply curve shifts to the right.