Assume that an economy producing two products, skateboards and in‐line skates, is initially in equilibrium, and that skateboards and in‐line skates are substitutes. If consumer preferences shift away from skateboards and toward in‐line skates, which of the following will not occur?

Question

Quizplus · Accepted Answer

When consumer preferences shift away from skateboards and toward in-line skates, it is expected that the demand for skateboards will decrease while the demand for in-line skates will increase. This shift in demand will likely lead to losses for skateboard producers and profits for in-line skate producers. Over time, capital will move towards the more profitable in-line skate production rather than skateboard production, making option D incorrect.

Assume That an Economy Producing Two Products, Skateboards and In‐line