Answer to Question #198967 in Microeconomics for belinda

Question

In the market for sugar, there is an increase in the number of households in the market, at the same time there is an increase in the price of molasses(a substitute for sugar), use a graph to illustrate and explain the impact of these changes on the equilibrium price and equilibrium quantity of sugar.

Answer 1

The increase of the households and the increase in price of the substitute will increase the demand for the sugar from D1 to D2 and the equilibrium price will rise from P1 to P2 as the equilibrium quantity increase from Q1 to Q2.