Input Prices || Factors Affecting Supply (Part-3)
Summary
TLDRThis educational video explains the third factor influencing supply: input prices. Inputs, such as labor and raw materials, are essential for production. An increase in input prices, like higher wages, raises production costs, reduces profits, and leads to a decreased supply, represented by a leftward shift. Conversely, a decrease in input prices can lower costs, increase profits, and result in an increased supply, indicated by a rightward shift. The video provides a clear understanding of how input price fluctuations directly affect supply in the market.
Takeaways
- 📚 The third factor affecting supply is input prices, which are crucial in the production process.
- 👷 Inputs include labor and raw materials, with labor being represented by the wage rate.
- 💰 Input prices directly influence the cost of production and, consequently, the profitability of a firm.
- 📈 An increase in input prices, such as a rise in wage rates, leads to higher production costs.
- 📉 Higher production costs can result in reduced profits, which in turn can decrease the supply of a commodity.
- 🔄 A decrease in input prices, such as a drop in wage rates, can lower production costs and increase profits.
- 📊 When profits increase due to lower input prices, firms are more likely to increase their supply of goods.
- 🚫 An increase in input prices can cause a leftward shift in the supply curve, indicating reduced supply.
- 🚸 A decrease in input prices can lead to a rightward shift in the supply curve, signifying increased supply.
- 🔑 Understanding input prices is key to analyzing how changes in production costs affect supply in the market.
- 📚 The script emphasizes the relationship between input prices, production costs, profits, and the overall supply of goods.
Q & A
What is the third factor affecting supply discussed in the script?
-The third factor affecting supply is input prices.
What are inputs in the context of production?
-Inputs are resources used in the process of production to create output, such as labor or raw materials.
What does the term 'input prices' refer to in the script?
-Input prices refer to the cost of resources used in production, such as the wage rate for labor or the cost of raw materials.
How does an increase in input prices affect the cost of production?
-An increase in input prices leads to an increase in the overall cost of production.
What is the impact of increased input prices on profits?
-Increased input prices result in decreased profits due to higher production costs.
How does a change in input prices affect the supply of a commodity?
-An increase in input prices can reduce supply, while a decrease can increase supply.
What is the term used to describe a decrease in supply due to increased input prices?
-A decrease in supply due to increased input prices is referred to as a leftward shift.
What happens to the supply of a commodity when input prices decrease?
-When input prices decrease, the supply of a commodity increases, as it becomes more profitable for firms to produce.
What term describes the increase in supply when input prices decrease?
-An increase in supply due to decreased input prices is known as a rightward shift.
What are the two scenarios discussed in the script regarding changes in input prices?
-The two scenarios are an increase in input prices leading to a reduction in supply, and a decrease in input prices leading to an increase in supply.
How does a change in input prices affect the profitability of a firm?
-An increase in input prices can reduce profitability by increasing production costs, while a decrease can enhance profitability by reducing those costs.
Outlines
💰 Impact of Input Prices on Supply
This paragraph discusses the influence of input prices on the supply of goods. Inputs, such as labor and raw materials, are crucial in the production process, and their costs directly affect the overall cost of production. The script explains that an increase in input prices, like a rise in wage rates, leads to higher production costs, reduced profits, and consequently, a decrease in supply, which is depicted as a leftward shift. Conversely, a decrease in input prices results in lower production costs, increased profits, and an expansion of supply, represented by a rightward shift. The importance of understanding the relationship between input costs and supply is emphasized for making informed business decisions.
Mindmap
Keywords
💡Supply
💡Input Prices
💡Inputs
💡Labor
💡Raw Material
💡Wages
💡Cost of Production
💡Profits
💡Leftward Shift
💡Decrease in Input Prices
💡Rightward Shift
Highlights
Introduction to the third factor affecting supply: input prices.
Definition of inputs in the context of production.
Explanation of input prices including labor and raw material costs.
Clarification of the term 'input prices'.
Impact of increased wage rates on production costs and profits.
Consequence of increased production costs on supply.
Decrease in supply due to higher input prices leading to a leftward shift.
Introduction of the opposite scenario with decreased input prices.
Effect of lower wage rates on production costs and profits.
Increase in supply due to lower input prices leading to a rightward shift.
Importance of understanding the relationship between input prices and supply.
The impact of input price changes on the overall economic supply curve.
The concept of supply reduction in response to increased input costs.
The concept of supply increase in response to decreased input costs.
The economic principle of supply shifting in relation to input price changes.
Conclusion and summary of the lecture on input prices and supply.
Transcripts
hello students this is part three of
factors affecting Supply
so the third factor which affects Supply
is input prices
what is an input
inputs are used in the process of
production to produce output right
inputs can be labor
okay or raw material
fine
so basically input prices means for
example prices of Labor
prices of Labor is Wages wage rate
or prices of raw material
clear
I hope this input prices this word is
clear okay price of an input so price of
Labor is wage rate or wages or basically
price of raw material
fine
now there can be two cases
if there is an increase in input prices
if there is an increase in input prices
for example the wage rate increases the
wages of the labor increases in that
case
the cost of the production
the overall cost of production
will be increased
profits
will go down
and in this situation
Supply will be
reduced
and when Supply decreases it is a case
of leftward shift
keyboard
further videos
shift
second case it is just the opposite one
that when there is a decrease in input
prices
suppose that the wage rate or the wages
of Labor decreases in this situation the
cost of production
because of formco lower wages
means profits will be increased and in
this situation it is beneficial for the
firm to supply so basically supply of a
commodity will be increased and when
Supply is increased to shift rightward
shift
clear
thank you
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