Question

At the beginning of the school year Target decides to drop their prices on ALL school supplies from $20 to $10 a pack. What happens to the demand for school supplies at HEB?

Answer 1

The change in prices at Target for school supplies is likely to influence the demand for school supplies at HEB. When the price of a substitute good decreases, it typically leads to a decrease in the demand for the same goods at other stores. Therefore, the demand for school supplies at HEB is likely to decrease as a result of Target's price drop.

Step-by-step explanation:

The change in prices at Target for school supplies is likely to influence the demand for school supplies at HEB. When the price of a substitute good, like school supplies at Target, decreases, it typically leads to a decrease in the demand for the same goods at other stores, such as HEB. This is because consumers may choose to switch to Target to take advantage of the lower prices.

Let's assume that before Target lowered their prices, the demand for school supplies at HEB was Qd1. After the price drop, some consumers may decide to buy their supplies at Target instead, resulting in a decrease in the demand for school supplies at HEB. We can represent this as Qd2, where Qd2 is less than Qd1. Therefore, the demand for school supplies at HEB is likely to decrease as a result of Target's price drop.