Paper producers can manufacture both printing and drawing paper. What effect would rising prices for printing paper have on the market for drawing paper?

Question

Quizplus · Accepted Answer

Paper producers can choose to allocate their resources towards the production of either printing paper or drawing paper. If the price of printing paper rises, producers are likely to shift their production towards printing paper to take advantage of the higher profit margins. As a result, the supply of drawing paper will decrease, causing the price of drawing paper to potentially rise as well.

Paper Producers Can Manufacture Both Printing and Drawing Paper