If the supply of pencils, a substitute for pens, increases, what will happen to the equilibrium p...
If the supply of pencils, a substitute for pens, increases, what will happen to the equilibrium price of pencils and to the equilibrium price of pens?
Homework Answers
Answer
Decreases
decreases
---------
An increase in the supply of pencils shifts supplies curve to the right which increases the quantity and decreases price.
A decrease in the price of substitute goods decreases the demand for the other good. It means the demand for pen decreases. It decreases the quantity and price of a pen in the new equilibrium.
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