Suppose the demand for furniture remains constant. If there is a decrease in the cost of wood used to make furniture, _____.
A) the equilibrium price of furniture will increase while the equilibrium quantity will decrease
B) the equilibrium price of furniture will fall while the equilibrium quantity will increase
C) the equilibrium price and quantity of furniture will fall
D) the equilibrium price and quantity of furniture will increase

Question

Quizplus · Accepted Answer

A decrease in the cost of wood, a key input for making furniture, would lead to a decrease in production costs for furniture makers. This would likely result in an increase in supply, assuming demand remains constant. According to basic economic principles, an increase in supply, with demand holding steady, would lead to a lower equilibrium price and a higher equilibrium quantity of furniture sold.

Suppose the Demand for Furniture Remains Constant