zachar2303 zachar2303

14-02-2019
Business

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In the market for skateboards, suppose the price of scooters (a substitute) falls slightly in price, while the cost of labor to produce skateboards increases significantly. what is likely to happen to the equilibrium price and quantity?

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MrCreighton MrCreighton

14-02-2019

In this case, the equilibrium price and quantity will go up.

If the cost of substitutes go down, that means that consumers will be less likely to purchase your products for the same price.

Also, if the price of labor goes up, the the producer will likely charge a higher price as well or their marginal profit will decrease, meaning they will need to sell more units.

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