Question

Consider the markets for ball-point pens and the market for "rollerball" pens. Suppose that, due to an increased cost of the metal that is used in "rollerball" pens, the prices of "rollerball" pens increase. There are no other changes.a. What would happen to the demand schedules of both products? The demand curve for ball-point pens would ________ ; the demand curve for "rollerball" pens would _________ . Fill in increase, decrease, or not change.b. This is true because the two products have a unique relationship. What is the likely relationship between "rollerball" pens and ball-point pens? They are:i. complementary goodsii. substitute goodsiii. normal goodsiv. inferior goods

Answer 1

The correct answer is: increase; not change; option ii.

Step-by-step explanation:

An increase in the cost of production would lead to an increase in the price of rollerball pens, this will cause the quantity demanded to decrease. This decline in the quantity demanded will be indicated by an upward movement on the same demand curve. There will be no shift in the demand curve.

As the price of rollerball pens will increase, the consumers will prefer the cheaper substitute. This will cause an increase in the demand for ball-point pens.

The rollerball pens and ball-point pens are substitute. This means that they can be used in place of each other.