Answer to Question #308128 in Microeconomics for Ntsako

Question

The cost of sunflower seeds has increased .sunflower seeds are an input when sunflowers are produced .explain verbally how this change will affect the market of sunflowers (5) marks

Answer 1

The cost of sunflower seeds will make the suppliers to supply it at a higher price. This will lead to a general increase in the cost of production. The output price of the product, which is sunflower will also increase. In other words, the price of buying sunflower will increase in the market. When the price of sunflower increases, it will lead to reduction in the quantity demanded by customers due to high price while the supply of sunflower will be high because the firms wants to make maximum profits. This will lead to surplus in the market without any body to by the product. Therefore, increase in price of sunflower seed have a ripple effect, which goes and affects the price of the product in the market.