7 Other things being equal what effect will each of the foll

7 Other things being equal, what effect will each of the following have upon the demand for, and price of, product B? a. Product B becomes more fashionable. b. The price of product C, a good substitute for B, goes down. e. Consumers anticipate declining prices and falling incomes d. There is a rapid upsurge in population growth.

Solution

a) If the product B becomes more fashionable the demand for the product increases as the demand increases the income for the company B increases thus the price increases a slightly

b) If the substitute product price of C goes down the demand for B increases where as the income decreases thus leading it lower its prices.

c) Due to falling incomes and declining prices there will be no change in the demand of product B but the price value decreases.

d) Due to population growth the demand for product increases which leads to increase in prices.