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Impact in the wooden yoyo market if the price of wood increases.

Impact in the wooden yoyo market if the price of wood increases.

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Answer #1

Answer :

If the price of wood increases, input cost will be higher, therefore, supply curve will shift to the left.

As shown in the figure below, the change in the wooden yoyo market will be as follows:

Supply curve will shift to the left from S1 to S2.

Equilibrium point will change from E0 to E1.

Equilibrium price will increase from P0 to P1 and Equilibrium quantity will decrease from Q0 to Q1 as shown in figure above.

Overall, there will be loss to the society due to less productivity in the wooden yoyo market as a result of increase in price of the wood.

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