Suppose that the garden gnome industry was in long-run equilibrium given the circumstances described .Suppose,, that it was discovered to everyone's surprise on January 1, 1993, after it was too late to change orders for gnome molds, that the cost of the plaster and labor needed to make a gnome had changed to $9.If the demand curve does not change, what will happen to the equilibrium price of gnomes?

Question

Quizplus · Accepted Answer

If the cost of production changes but the demand curve remains unchanged, the equilibrium price in the market does not necessarily change. The change in cost affects the supply side, but without a shift in demand, the price consumers are willing to pay (equilibrium price) stays constant.

Suppose That the Garden Gnome Industry Was in Long-Run Equilibrium