Answer to Question #225688 in Microeconomics for Sharon Le Roux

Question

Assume there is an increase in the price of the wood used in the production of kitchen tables. Illustrate and explain how this would impact the equilibrium price and quantity of kitchen tables.

Answer 1

if the price of wood rises, then the price of tables will increase and the number of kitchen tables will decrease. the price of kitchen tables will not increase as much as the price of wood because the manufacturer needs to sell them. But that depends on the policies of each firm. And the number of tables will not decrease as much as their price will increase, because people will need tables.