Question

Consider the market for pens. suppose that increased medical concerns over lead pencils have led schools to steer away from pencil use in favor of pens. moreover, the price of ink, an important input in pen production, has increased considerably.

Answer 1

Answer: Rise in price of pens. Change in quantity unambiguous

Explanation: When schools steer away from pencils in favor of pens, the demand for pens will increase in the market. This will lead to a rightward shift in the demand curve for pens.

While, a rise in price of ink an input in pen production will increase the cost of pen production. This will lead to fall in the supply of pens, shifting the supply curve upward to the left.

The net effect of this change is a rise in the price of pens. However, the change in quantity cannot be determined.

When shift is demand is greater than shift in supply curve, quantity will rise.

When shift is demand is less than shift in supply curve, quantity will fall.