Question

6 . How shifts in demand and supply affect equilibrium 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 ink, an important input in pen production, has increased considerably.

Answer 1

Answer:

Suppose that the number of students with an allergy to pencil erasers increases, causing more students to switch from pencils to pens in school.

• This will shift the demand curve to the right, increasing the total demand at all price levels.

Moreover, the price of ink, an important input in pen production, has increased considerably.

• This will shift the supply curve to the left, increasing the price of pens at every demand level.

What is sure is that the price of pens will increase. It is likely that the quantity demanded increases, but the extent by which the quantity demanded will increase is unknown.