How does an increase in the cost of raw materials affect the marginal costs of producing an item?

Answer 1

Raw Materials are a variable input in production. Increasing the price of a variable input, be it eaw materials, labor or whatever will increase vaiable costs and therefore, marginal cost of production.. If 1takes 1 ubit of labor and 2 tons of ore to produce 1 ton of steel and labor costs 100 and ore costs 200 per ton then it will cost 300 dollars to produce another ton of steel. If the price of ore doubles to 200 it will now cost $500 yo produce another ton of steel.