contestada

New oak tables are normal goods. What would happen to the equilibrium price and quantity in the market for oak tables if the price of maple tables rises, the price of oak wood rises, more buyers enter the market for oak tables and the price of wood saws increased?

Respuesta :

Answer:

The equilibrium price will increase and change in equilibrium quantity will be unambiguous.

Explanation:

If the price of maple tables rise, the consumers will prefer the cheaper substitute. So the demand for oak tables will increase. At the same time, the entry of new buyers in the market for Oaktables will also increase the demand.  

This increase in demand for oak tables will cause the demand curve to move to the right.  

An increase in the price of oak woods and wood saws will increase the input cost for oak table producers. So their cost of production will increase. This will cause the supply of oak tables to decrease.  

This decrease in supply will cause the supply curve to shift to the left.  

This leftward shift in the supply curve and a rightward shift in the demand curve will cause the equilibrium price to increase.  

The change in the equilibrium quantity will depend upon the proportionate change in demand and supply. If both changes by the same proportion the equilibrium quantity will remain the same.  

If demand increases more than the decrease in supply, the quantity will increase. IF supply decreases more than the increase in demand, the equilibrium quantity will decrease.