Answer to Question #329230 in Microeconomics for ...

Question

Suppose that equilibrium price in this market were to REMAIN at P2 while equilibrium quantity INCREASES to Q4. Which of the following could account for such a change?

1.an increase in income, assuming this is a normal good.

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

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

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

Answer 1

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