Question

Suppose the incomes of buyers in a market for a particular inferior good decrease and there is also a reduction in input prices. A Equilibrium output would increase, but the impact on equilibrium price would be ambiguous. B. Equilibrium price would increase, but the impact on equilibrium output would be ambiguous. C. Equilibrium output would decrease, but the impact on equilibrium price would be ambiguous. D. Equilibrium output would decrease, and equilibrium price would decrease

Answer 1

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

With a decrease in input prices, the producers will be willing to produce more items, but we are unsure if consumers will be able to buy more because they drop in income; therefore, we don't know what the price will do.

Answer 2

A. Equilibrium output would increase, but the impact on equilibrium price would be ambiguous.

Step-by-step explanation