An increase in the price of tomatoes will cause _________.
- Aan increase in the supply of tomatoes
- Ba decrease in the supply of tomatoes
- Can increase in the supply of tomato ketchup
- Da decrease in the supply of tomato ketchup
Solution & Step-by-step Explanation
Tomatoes are a primary input/raw material for manufacturing tomato ketchup. According to the laws of supply, an increase in the price of an input (tomatoes) increases the cost of production for the final good (tomato ketchup). This rise in production costs causes a reduction in profits, thereby leading to a decrease in the supply of tomato ketchup.Note: An increase in the price of tomatoes causes an increase in the "quantity supplied" of tomatoes, not a change/shift in the "supply" curve of tomatoes itself.