Pay rise increases production costs, shifting supply left

Steps:

• Pay rise raises labor costs without productivity gains, increasing total production costs.
• Higher costs reduce quantity supplied at each price level.
• Supply curve shifts leftward, leading to higher equilibrium price and lower quantity.
• Workers not buying the product confirms no demand shift occurs.

Why C is correct:

• Per the law of supply, higher input costs (wages) decrease supply, shifting the curve left.

Why the others are wrong:

• A: No factors like income or preferences change to reduce demand.
• B: No evidence of increased consumer demand or population growth.
• D: Costs rise, not fall, so supply does not increase.

Final answer: C