Market Graph Analysis: Automobile Tires After Increase in Rubber Price

What happens to the market for automobile tires when the price of rubber increases?

How does the increase in rubber price impact the supply, price, and quantity of automobile tires in the market?

Answer:

When the price of rubber increases, the market for automobile tires will experience a decrease in supply, resulting in a higher price and lower quantity.

Explanation:

Market for Automobile Tires after an Increase in Rubber Price

When the price of rubber increases, it will directly affect the production cost of automobile tires. This will cause a leftward shift in the supply curve, indicating a decrease in supply. As a result, the equilibrium point will change, leading to a higher price and lower quantity of automobile tires in the market.

It is important to understand how changes in input costs like rubber prices can impact the supply and pricing of products in the market. By analyzing market graphs, we can visualize these changes and predict the outcome on prices and quantities of goods.