Lead, an input in the production of ammunition, has increased in price from $0.60/lb in 2006 to over $1.50/lb in 2007. What happened to the equilibrium price and quantity of ammunition over this period?

Question

Quizplus · Accepted Answer

An increase in the price of an input in the production process will cause an increase in the cost of production for firms. This will result in a decrease in the supply of ammunition as firms will be willing to supply less at any given price. As a result, the equilibrium price will increase, and the equilibrium quantity will decrease.

Lead, an Input in the Production of Ammunition, Has Increased