CBSE Class 12-commerce Answered

When input price decreases, producers can afford to sell more at the existing price. Therefore, there is rightward shift in the supply curve from SS to SS₁. Because of an increase in supply, the price will reduce from P to P₁ which causes an extension of demand and contraction of supply. Finally, new equilibrium point arrives at point B. When equilibrium price decreases and the equilibrium quantity increases with an increase in input price.