Answer to Question #82303 in Macroeconomics for Michael Cooper

Question

“I cannot believe the demand for Snoopy gear. Ever since Uno the Beagle, won Best in Show at the Westminster Dog show, we can’t keep the merchandise on the shelves. I think we can raise prices on this merchandise”. Please explain this statement.

Answer 1

“I cannot believe the demand for Snoopy gear. Ever since Uno the Beagle, won Best in Show at the Westminster Dog show, we can’t keep the merchandise on the shelves. I think we can raise prices on this merchandise”.

The statement describes the situation, when the demand for a particular good increases. In this case as there is a shortage of goods the producers increase the price, so both equilibrium quantity and price increase.