Suppose there is a linear downward-sloping demand curve and a linear upward-sloping supply curve for a good. The price of a substitute good increases and the price of an input to production also increases.  Graph the original demand (D1) and supply (S1) curves, then dray the curves (D2 & S2) after the substitute good and input prices increase.  How will the equilibrium price change after the substitute and input prices increase?

Microeconomics
13th Edition
ISBN:9781337617406
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter3: Supply And Demand: Theory
Section: Chapter Questions
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  • Suppose there is a linear downward-sloping demand curve and a linear upward-sloping supply curve for a good. The price of a substitute good increases and the price of an input to production also increases.  Graph the original demand (D1) and supply (S1) curves, then dray the curves (D2 & S2) after the substitute good and input prices increase.  How will the equilibrium price change after the substitute and input prices increase?
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