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Suppose there is a linear downward-sloping demand curve and a linear upward-sloping supply curve for a good. The price of a substitute good increases and the price of an input to production also increases. Graph the original demand and supply curves, and the curves after the substitute good and input prices increase. How will the equilibrium price change after the substitute and input prices increase?
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Microeconomics


Edition: 6th
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A year ago
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See the above figure. The new demand curve will be to the right of the original demand curve and the new supply curve will be to the left of the original supply curve. The equilibrium price will increase. The change in equilibrium quantity cannot be determined and will depend on the relative magnitude of the supply and demand shifts.
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A year ago
Great answer, great website
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