Shoes are a normal good and people's incomes rise.Simultaneously the number of companies making shoes decreases.As a result,the equilibrium price of a pair of shoes ________ and the equilibrium quantity ________.
A) definitely rises; might increase, decrease, or not change
B) definitely rises; definitely increases
C) might rise, fall, or not change; might increase, decrease, or not change
D) None of the above answers is correct.

Question

Quizplus · Accepted Answer

When people's incomes rise, the demand for normal goods like shoes increases, leading to a higher equilibrium price. Simultaneously, a decrease in the number of companies making shoes reduces supply, also pushing the price up. However, the effect on equilibrium quantity is uncertain as it depends on the relative magnitudes of the shifts in demand and supply.

Shoes Are a Normal Good and People's Incomes Rise