Consider the market for pens. suppose that the number of students with an allergy to pencil erasers increases, causing more students to switch from pencils to pens in school. moreover, the price of plastic, an important input in pen production, has dropped considerably.

Respuesta :

These two events will have an effect on the equilibrium quantities of the market for pens. The equilibrium quantities will increase explicitly While the price change will also increase given that the number of pens demanded increase and the cost of pens dropping.

As a result in the increase in the demand for pen and a decrease in the price of plastic, equilibrium quantity increases and there is an indeterminate effect on equilibrium price.

As a result of the increase in demand for pen, there would be an outward shift of the demand curve for pens, this increases equilibrium price and quantity.

The decrease in the price of plastic increases the supply of pens. This shifts the supply curve for pens outward. Equilibrium price decreases whole equilibrium quantity increases. Taking these two effects together, equilibrium quantity increases and there is an indeterminate effect on equilibrium price.

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