Question

What will happen to the equilibrium price of new textbooks if more students attend college, paper becomes cheaper, textbook authors accept lower royalties and fewer used textbooks are sold?

Answer 1

Answer:

The equilibrium may increase, decrease or remain the same.

Explanation:

If more students attend college they will need textbooks, so the demand for textbooks will increase. This will cause the demand curve to shift to the right.  

At the same time, as paper becomes cheaper, the cost of producing textbooks will get reduced. This will increase the supply of new textbooks. This increase in supply will cause the supply curve to shift to the right.  

If textbook authors accept lower royalties the cost of production for textbooks will decrease, so the supply will increase.  

If fewer old textbooks are sold, the demand for new textbooks will increase.  

This increase in both demand and supply of textbooks will increase the equilibrium quantity of textbooks. But the change in equilibrium price depends on the proportionate change in demand and supply.  

If both demand and supply increase by the same proportion, the equilibrium price will remain the same.  

If demand increases more than the supply, the equilibrium price will increase.  

If supply increases more than demand, the equilibrium price will fall.