Question

Prices of air conditioners and refrigerators have shot up in the new year as consumer durables makers pass on the impact of rising raw material costs and higher freight charges to customers, while home appliances like washing machines may witness a 5–10 per cent price hike later this month or by March.

(Source: The Economic Times)

Explain the behaviour of supply of this consumer durable. Illustrate the same in a diagram.

Answer 1

Supply will decrease as the same supply will be at a higher price (or lower supply at the same price) due to an increase in the cost of production and transportation. The supply curve will shift leftward, as shown below.