Question

Pens are normal goods. What will happen to the equilibrium price of pens if the price of pencils rises, consumers experience an increase in income, writing in ink becomes fashionable, people expect the price of pens to fall in the near future, the population increases, fewer firms manufacture pens, and the wages of pen-makers decrease?

Answer 1

Answer:

Equilibrium price rises

Equilibrium price rises

Equilibrium price rises

Equilibrium price falls

Equilibrium price rises

Equilibrium price rises

Equilibrium price falls

Explanation:

A normal good is a good whose demand increases when income rises.

If the price of pencils increases, the demand for pens would increase. This would lead to an excess of demand over supply and price would rise as result. Pens and pencils are substitute goods.

If income of consumers rise, the demand for pens would rise because pens are normal goods. The increase in demand would lead to an excess of demand over supply and prices would rise.

If writing in ink becomes more fashionable, the demand for pens would increase. The increase in demand would lead to an excess of demand over supply and prices would rise.

If people expect the price of pens to fall in the near future, consumer would reduce their demand for pens and shift it to the future. The fall in demand would lead to a fall in price.

If population increases, the demand for pens would rise. The increase in demand would lead to an excess of demand over supply and prices would rise.

If fewer firms supply pens, supply would fall. This would cause a leftward shift in the supply curve and prices would rise.

If wages of pen makers fell, firms would increase their demand for Labour and quantity supplied would increase. This increase would cause price to fall.

I hope my answer helps you.