In the following example determine 1 the market in question

In the following example determine (1) the market in question (2) whether a shift in demand or supply occurred – the direction of the shift and what induced the shift; and (3) the effect of the equilibrium price and qty. Draw your answer.

As technolgical innovation has lowered the cost of recycling used paper, fresh paper made from recylced stock is used more frequently.

Solution

1. market is competitive market

2. supply curve shifts rightward

3. equilibrium price will decrease and quantity will increase