Smart phones are normal goods. What will happen to the equilibrium price and quantity of smart phones if phone plans become cheaper, more firms start producing smart phones, and smart phone users experience an increase in income?

Question

Quizplus · Accepted Answer

If phone plans become cheaper, more firms start producing smart phones, and smart phone users experience an increase in income, the demand for smart phones will increase. As a result, the equilibrium price will rise and the quantity will also rise. Therefore, the correct answer is D - quantity will rise and the effect on price is ambiguous.

Smart Phones Are Normal Goods