Suppose a recent and widely circulated medical article reports new benefits of exercise. Simultaneously, the price of the parts needed to make bikes falls. What is the likely effect on the equilibrium price and quantity of exercise bikes sold?
A) Price of exercise bikes decreases and quantity sold remains the same.
B) Price of exercise bikes increases and quantity sold also increases.
C) Price of exercise bikes remains the same and quantity sold increases.
D) The change in price is ambiguous, but the quantity sold increases.

Question

Quizplus · Accepted Answer

The demand for exercise bikes increases due to the reported benefits of exercise, while the supply increases due to the fall in production costs. This leads to an increase in quantity sold, but the effect on price is ambiguous as it depends on the relative shifts in demand and supply.

Suppose a Recent and Widely Circulated Medical Article Reports New