[Anonymous]

I’m looking through the Ninja Notes in regards to the economic section and it mentions that when price increases, supply will also increase thus a direct relationship. In the Becker chapter, it mentions that they have an inverse relationship ( Price increase = supply decrease). Am I interpreting the Ninja notes incorrectly? To me the Becker explanation makes more sense.

[Excited_CPA]

Hi CPAski,

I think they're talking about two different prices in the Ninja notes and in Becker.

If the price of a product goes up, then suppliers would want to make more of the products to make more money.

If the price of a product goes down, then suppliers would not want to make more of the products since they could be producing other, more profitable products.

However, if the price of the components of a product goes up, then it's more expensive for the suppliers to make a product, so they'll make less of it.

For example, what if the price of sugar went up, and you need sugar to make Skittles (no idea why this was the first thing to pop in my head). The suppliers would be less likely to make as much Skittles, since their costs go up, and profits go down.

Hope this helps!

BEC 04/14/12 87
FAR 08/28/12 88
AUD 10/06/12 94
REG 02/09/13 91

[Anonymous]

Ok, got it. It's more of selling price vs price of the raw materials. Hey, thanks! 🙂 I love the another71 community.

[Author]

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