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Equilibrium price of pens and the quantity exchanged

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Consider the market for two goods that are substitutes, such as pens and pencils. Assume that a technological breakthrough reduced the cost of producing pens.

(a) What would happen to the supply of pens? Draw a graph and show this change.

(b) What would happen to the equilibrium price of pens and the quantity exchanged? Please show this on the graph you have drawn in (a).

(c) What effect would this change in the price of pens have on the demand and supply of pencils? Please give an explanation and draw a graph showing the changes. You will have to draw one graph for (a) and (b) and a second graph for (c).

Reference no: EM132649228

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