Medical authorities announced in the late 1980s that an acne medicine named Retin-A also had previously unknown wrinkle-reducing properties. What would an economist have expected to happen to the price and quantity sold of Retin-A after this announcement?

Question

Quizplus · Accepted Answer

An economist would expect both the price and quantity sold of Retin-A to rise following the announcement of its wrinkle-reducing properties. This is because the announcement increases the demand for Retin-A, as it now appeals to a broader market (those seeking wrinkle treatment in addition to those treating acne). With higher demand, the price consumers are willing to pay increases, and the quantity sold also increases to meet this new demand.

Medical Authorities Announced in the Late 1980s That an Acne