In: Economics
Pens are normal goods. What will happen to the equilibrium price of pens if the prices of pencils rises, consumers experience an increase in income, writing in ink becomes fashionable, people expect the price of pens to rise in the near future, the population increases, fewer firms manufacture pens, and the wages of pen-makers increase?
In all these cases, equilibrium price of pens increases. This is
explained below.
Pens and pencils are substitutes. So, as price of pencils rise, its
demand will decrease. Thus, demand for pens will increase. This
will increase the equilibrium price of pens.
An increase in income increases the demand for normal goods. So,
equilibrium price of pens rise.
As writing in ink becomes fashionable, demand for pens will
increase. So, equilibrium price of pens rise.
As people expect the price of pens to rise in the near future, they
will increase their demand now. So, equilibrium price of pens
rise.
As the population increases, demand for normal goods increase. So,
equilibrium price of pens rise.
As fewer firms manufacture pen, supply of pens decrease. So,
equilibrium price of pens rise.
As the wages of pen-makers increase, cost of production
of pens increase which decrease the supply of pens. So, equilibrium
price of pens rise.