Question

Suppose that equilibrium quantity in a market were to remain at Q2 while equilibrium price increases from P2 to P1. Which of the following could account for such a change?

1.an increase in the price of a substitute combined with a technological innovation reducing production costs.

2.a decrease in the price of a substitute combined with a technological innovation reducing production costs.

3.an increase in the price of a complement combined with a decrease in the price of a factor of production.

4.a decrease in the price of a complement combined with an increase in the price of a factor of production.

Answer 1

1. an increase in the price of a substitute combined with a technological innovation reducing production costs.