ou are a producer of cold medicine. Last month, a flood at your factory eliminated 50% of your firm's production capability. At the same time, your compensation costs increased by 5% because of an increase in healthcare costs. What is the consequence of these events?

Question

Giovanna Estes

Business

22 November, 12:16

ou are a producer of cold medicine. Last month, a flood at your factory eliminated 50% of your firm's production capability. At the same time, your compensation costs increased by 5% because of an increase in healthcare costs. What is the consequence of these events?

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Answers (1)

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Jaydan · Answer 1

The flood shifts the supply to the left.

The increase in healthcare costs shifts the supply curve to the left.

Explanation:

An increase in the cost of production inputs (increase in health costs) or a decrease in the availability of resources (the flood reduced the firm's production capability), will shift the supply curve to the left.

A leftward shift of the supply curve will lower the quantity supplied and will increase the price of the good at every level of demand.