Question

Suppose the incomes of buyers in a market for a particular normal good decrease and there is also a reduction in input prices. What would we expect to occur in this market? a) Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. b) Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. c) Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d) Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

Answer 1

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

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