Final answer:
When the price of an iPad increases, consumers are likely to shift their preferences to Android tablets, leading to an increase in demand for Android tablets. Supply and demand interact to determine the equilibrium price and quantity, and a price rise in one of the substitute goods can affect the demand for the other. Market equilibrium is where the quantity supplied equals the quantity demanded, and economic pressures push the price toward this equilibrium level.
Step-by-step explanation:
Interaction of Supply and Demand
Supply and demand interact to create equilibrium in the market, which is the point where the quantity of a product demanded is equal to the quantity supplied. When an iPad's price increases by $20 due to changes in online sales policies, a substitution effect is likely to occur where consumers shift their preference towards Android tablets, leading to an increase in demand for Android tablets (option a). This shift occurs because iPads and Android tablets are substitute goods, and a price rise in one leads to an increase in demand for the other.
In terms of market equilibrium changes, an increase in demand, assuming supply remains constant, will often lead to a higher equilibrium price and a larger equilibrium quantity. Conversely, a decrease in demand will typically lead to a lower equilibrium price and a smaller equilibrium quantity. Similarly, an increase in supply can lower prices and increase the quantity sold, while a decrease in supply can raise prices and lower the quantity sold.
Furthermore, market forces would work to push the price towards an equilibrium where no consumer is willing to pay more, and no producer is willing to accept less. The dynamics of supply and demand are crucial in understanding how markets respond to changes in economic conditions, technology, government policies, and other factors.