Pens are normal goods. What will happen to the equilibrium price of pens if the prices of pencils rises, consumers experience an increase in income, writing in ink becomes fashionable, people expect the price of pens to rise in the near future, the population increases, fewer firms manufacture pens, and the wages of pen-makers increase?

Question

Quizplus · Accepted Answer

Each factor mentioned either increases demand (price of pencils rises making pens relatively cheaper, increase in income, writing in ink becomes fashionable, expectation of future price increase, population increase) or decreases supply (fewer firms manufacturing pens, increase in wages of pen-makers). Both of these effects put upward pressure on the equilibrium price of pens.

Pens Are Normal Goods