Suppose that the number of sellers in a market increases and an increase in price of...

Suppose that the number of sellers in a market increases and an increase in price of a substitute good occurs. What would we expect to happen in the market?

Expert Solution

As the number of sellers increase, the supply increases shifting the supply curve outwards.

There is an increase in the price of the substitute good. This raises the demand for the given good. The demand curve therefore shifts outwards.

As a result there is an increase in equilibrium quantity but the effect on equilibrium price depends on the magnitude of shifts of the curves.

Rahul Sunny answered 2 years ago

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