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Answer :
Final answer:
The increase in the cost of inputs such as eggs and milk results in a decrease in the supply (S) of cakes at the bakery, as it becomes less profitable to produce them. The correct option is C.
Explanation:
When the cost of eggs and milk, which are key inputs for cake production, increases, this leads to a rise in the cost of production for the bakery.
Given that the cost of production has increased, the bakery may not be able to produce the same quantity of cakes at the previous price levels. In economic terms, this situation will lead to a decrease in the entire supply curve.
Therefore, the correct answer to what happens in the bakery market for cakes when the cost of eggs and milk increases is: b) Supply (S) decreases. This is because the increase in input costs makes it less profitable for the bakery to produce cakes, and as a result, they will supply less at every price level.
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