Suppose the cost of raw materials used by the cotton industry rises to a larger

Question

Suppose the cost of raw materials used by the cotton industry rises to a larger extent compared to the increase in demand in the market. Which of the following situations will arise? a. The incidence of the higher cost will fall partially on the consumers and partially on the sellers. b. The incidence of the higher cost will fall completely on the low cost firms. c. The incidence of the higher cost will fall completely on the high cost firms. d. The incidence of the higher cost will fall completely on the consumers. Suppose the cost of raw materials used by the cotton industry rises to a larger extent compared to the increase in demand in the market. Which of the following situations will arise? a. The incidence of the higher cost will fall partially on the consumers and partially on the sellers. b. The incidence of the higher cost will fall completely on the low cost firms. c. The incidence of the higher cost will fall completely on the high cost firms. d. The incidence of the higher cost will fall completely on the consumers. Suppose the cost of raw materials used by the cotton industry rises to a larger extent compared to the increase in demand in the market. Which of the following situations will arise? a. The incidence of the higher cost will fall partially on the consumers and partially on the sellers. b. The incidence of the higher cost will fall completely on the low cost firms. c. The incidence of the higher cost will fall completely on the high cost firms. d. The incidence of the higher cost will fall completely on the consumers. Suppose the cost of raw materials used by the cotton industry rises to a larger extent compared to the increase in demand in the market. Which of the following situations will arise? a. The incidence of the higher cost will fall partially on the consumers and partially on the sellers. b. The incidence of the higher cost will fall completely on the low cost firms. c. The incidence of the higher cost will fall completely on the high cost firms. d. The incidence of the higher cost will fall completely on the consumers. Suppose the cost of raw materials used by the cotton industry rises to a larger extent compared to the increase in demand in the market. Which of the following situations will arise? a. The incidence of the higher cost will fall partially on the consumers and partially on the sellers. b. The incidence of the higher cost will fall completely on the low cost firms. c. The incidence of the higher cost will fall completely on the high cost firms. d. The incidence of the higher cost will fall completely on the consumers.

Explanation / Answer

A since, low cost firms will have difficulty in purchasing higher cost cotton & equilibirium price will increase as lower supply is there, so consumers will also be affected.

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