My friend is trying to make sure he understands what you’re saying, he says this is what he gathers from your comments.
1. Demand for output up.
2. Price up –> Profit up.
3. Profit up –> Supply up.
4. Supply up –> Price down (by a lesser amount than in 2)
5. Demand for inputs up –> Price of inputs up.
6. Price of inputs up –> Supply down (by a lesser amount than in 4).
This doesn’t seem quite right to me. I’ve done some thinking and now it seems totally wrong, but I need help explaining it. Prices of inputs increase to the point where there is no longer profit potential
