Which Of The Following Would Most Likely Cause Equilibrium Quantity And Price Of X To Rise?
1. Which of the following would most likely cause equilibrium quantity and price of x to rise?
(a) a fall in income when the income elasticity of demand for x is positive
Wrong. This will cause a drop in demand and thus a fall in quantity.
(b) a fall in the price of complementary product y
Correct. A fall in a complementary product will cause a rise in demand for that product “y” and thus a rise in demand of product “x” (see graph).
(c) a fall in the price of substitute product Z
Wrong. A fall in a substitute product will cause an increase in the demand for product Z and thus a fall in the demand for product x.
(d) an increase in the cost of producing x
Wrong. The increase in production cost will decrease supply (see graph).
(a) a fall in income when the income elasticity of demand for x is positive
Wrong. This will cause a drop in demand and thus a fall in quantity.
(b) a fall in the price of complementary product y
Correct. A fall in a complementary product will cause a rise in demand for that product “y” and thus a rise in demand of product “x” (see graph).
(c) a fall in the price of substitute product Z
Wrong. A fall in a substitute product will cause an increase in the demand for product Z and thus a fall in the demand for product x.
(d) an increase in the cost of producing x
Wrong. The increase in production cost will decrease supply (see graph).