Did the increase in the price of cheese affect the quantity of burgers supplied or the supply of burgers?
The rise in the price of cheese decreased the quantity of burgers supplied. So the correct answer is Option D.
Understanding the Impact of Cheese Price Increase on Burger Supply
The Economics of Supply and Demand:
In economics, the law of supply states that as the price of a good rises, the quantity supplied of that good increases. Conversely, when the price of a good falls, the quantity supplied of that good decreases. The law of supply is based on the concept that producers will offer more of a good at a higher price because they can earn higher revenue. On the other hand, if the price of a good decreases, producers may choose to supply less of that good to maintain profitability.
Impact of Cheese Price Increase:
In the given scenario, the price of the cheese used in making burgers rose by 18 percent in 2020. This increase in input cost directly affects the cost of production of burgers. As the cost of production rises, producers may face pressure on their profit margins. In response to the higher cost of cheese, producers may decide to adjust their production levels.
Effect on Burger Supply:
When the price of cheese, a key ingredient in burger production, increases, it raises the overall cost of producing burgers. This cost increase may lead to a decrease in the quantity of burgers supplied in the market. Producers may choose to supply fewer burgers at the higher prices to maintain their profit margins. As a result, the quantity of burgers supplied in the market decreases due to the rise in the cheese price.
In conclusion, the increase in the price of cheese had a direct impact on the quantity of burgers supplied. The higher cost of cheese led to a decrease in the quantity of burgers supplied in the market as producers adjusted their production levels to maintain profitability. This scenario illustrates how changes in input prices can influence the supply of goods in the market, highlighting the interconnected nature of supply and demand dynamics in economics.