Suppose the demand for calendars increases in November. At the same time, the price of the ink used in the production of calendars increases. In the market for calendars, the equilibrium price rises, but the effect on the equilibrium quantity is ambiguous.

Question

Quizplus · Accepted Answer

The increase in demand for calendars would typically increase both the equilibrium price and quantity. However, the increase in the price of ink (a production cost) would likely decrease the supply of calendars, raising the price further but making the effect on the equilibrium quantity ambiguous since it depends on the relative magnitudes of the demand increase and the supply decrease.

Suppose the Demand for Calendars Increases in November