A firm's short- run demand function for some input will shift up if:
A)the competitive equilibrium price of the input decreases.
B)a new process makes the input more productive.
C)the prices of the fixed inputs decrease.
D)the price of the firm's product increases.

Question

Quizplus · Accepted Answer

According to the law of demand, an increase in the price of a product will lead to a decrease in the quantity demanded of the product. As a result, the firm will need to increase production to meet the demand. This will lead to an increase in the demand for inputs, including the input in question, and shift the short-run demand curve for the input upward. Therefore, the correct choice is D, the price of the firm's product increases. Choices A, B, and C would not have a direct effect on the demand for the input in question.

A Firm's Short- Run Demand Function for Some Input Will