Question

Assume the market for manufactured houses is in equilibrium. Imagine that trade restrictions increased the cost of cement, which is an input in making manufactured houses. How does this impact the manufactured house market

Answer 1

Answer: f. Supply of manufactured houses shifts leftward and manufactured houses increase in price

Explanation:

All else being equal, when the price of an input into the production process increases, it makes producing the goods in question more expensive and so producers will respond by reducing production levels to maintain Profitability.

As the price of cement rises, making manufactured houses becomes more expensive and so the makers of manufactured houses will reduce the number of manufactured houses they make. This will reduce Supply thereby shifting the Supply Curve to the left. The new Equilibrium level will indicate a higher Equilibrium price as shown in the attached graph.