Compar the effect of the increase in the cost of material

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Consider a relatively competitive market, as we have studied in class, for a for a conventional market good or service.

a. Draw a picture of this market in equilibrium.

b. Starting from the equilibrium shown in part a., suppose the price in this market falls (assume nothing else has changed). Draw a diagram that depicts this situation, and explain the condition of this market with respect to price, quantity demanded, and quantity supplied.

c. Starting anew from the equilibrium in part a., suppose that the cost of raw material used in the production of this good increases (assume nothing else has changed). Draw a diagram comparing the effect of the increase in the cost of materials in this market with the equilibrium depicted.

Reference no: EM13203298

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