If a firm has two production alternatives and the price of one decreases this will cause the other good's

Question

Quizplus · Accepted Answer

If the price of one production alternative decreases, it becomes cheaper to produce, potentially increasing the quantity supplied of that good. This does not directly affect the demand curve of the other good but can affect its supply curve. If the goods are substitutes in production, the supply of the other good might decrease (shift to the left) as resources are reallocated to the now cheaper-to-produce good. However, without specific information on the relationship between the goods (substitutes or complements in production), the most direct inference is that a decrease in production cost (implied by a decrease in price, assuming demand hasn't changed) would generally lead to an increase in supply of the cheaper good, not a direct shift in the other good's demand or supply curve. The correct interpretation of the effect on the other good's supply or demand curve depends on additional information about the relationship between the goods, which isn't provided here. My initial explanation focused on a common interpretation but lacked clarity on these nuances.

If a Firm Has Two Production Alternatives and the Price