Question

A decrease in the cost of production will lead to a. An increase in Demand b....

A decrease in the cost of production will lead to
a. An increase in Demand
b. An decrease in Demand
c. An increase in Supply
d. A decrease in Supply

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Homework Answers

Answer #1

Correct answer is c. because a fall in cost of production mainly occurs due to fall in the cost of factor/factors of production which enable suppliers to supply more quantity at any given price. Therefore, there exists an increase in supply which will shift the upwards sloping supply curve towards right.

Option a. is incorrect as decrease in the cost of production is not a factor which will affect demand.

Option b. is incorrect as decrease in the cost of production is not a factor which will affect demand.

Option d. is incorrect as a decrease in supply will occur when cost of production increases which enable suppliers to supply less quantity at any given price.

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