Consider the market for capital equipment.Suppose the price of firms' output increases.Holding all else constant,what will happen to the equilibrium rental price of capital equipment?

Question

Quizplus · Accepted Answer

When the price of firms' output increases, the firms will have more revenue to invest in capital equipment. This will increase the demand for capital equipment in the market, causing a shift to the right in the demand curve. As a result, the equilibrium rental price of capital equipment will increase, reflecting the new balance between higher demand and limited supply.

Consider the Market for Capital Equipment