Input Prices

To produce its output of ice cream, sellers use various inputs: cream, sugar, flavoring  icecream machines, the buildings in which the ice cream is made, and the labor of workers to mix the ingredients and operate the machines. When the price of one or more of these inputs rises, producmg. Ice cream is less profitable, and firms supply less ice cream. If input prices rise substantially, a firm might shut down and supply no ice cream at all. Thus, the supply of a good is negatively related to the price 0f the inputs used to make the good.

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