The price of butter (substitute of margarine in production) decreases. This causes the equilibrium price to ________ and the equilibrium quantity to ________ in the market for marg... The price of butter (substitute of margarine in production) decreases. This causes the equilibrium price to ________ and the equilibrium quantity to ________ in the market for margarine, ceteris paribus.
Understand the Problem
The question is asking about the impact on the equilibrium price and quantity in the market for margarine when the price of butter, a substitute, decreases. It explores the relationship between substitutes and their market effects.
Answer
decrease; decrease
The final answer is decrease; decrease.
Answer for screen readers
The final answer is decrease; decrease.
More Information
When butter, a substitute for margarine, becomes cheaper, more consumers will opt for butter, reducing demand for margarine. This lowers both the equilibrium price and quantity of margarine.
Tips
A common mistake is to assume the decrease in the price of butter directly affects the cost structure of margarine, rather than its demand.
Sources
- 3. Microeconomic Laws of Demand and Supply - Sample Problems - lidderdale.com
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