Question

3. suppose that in the market for good x (a normal good), the following occur simultaneously: (in) consumer incomes increase and (ii) the price of oil (an input to the production of x) increases. which of the following statements is true?? a) the equilibrium price of x could either increase or decrease, but equilibrium quantity will definitely decrease. b) the equilibrium quantity of x could either increase or decrease, but equilibrium price will definitely decrease c) the equilibrium price of x could either increase or decrease, but equilibrium quantity will definitely increase.. d) the equilibrium quantity of x could either increase or decrease, but equilibrium price will definitely increase.

Answer 1

If consumer incomes increase and the price of oil increases in the market for good X, it will have an effect on the equilibrium price and quantity. The impact on the equilibrium price and quantity of X will depend on the magnitudes of the shifts in the demand and supply curves.

Step-by-step explanation:

In the market for good X, if consumer incomes increase and the price of oil (an input to the production of X) increases simultaneously, it will have an effect on the equilibrium price and quantity of good X.

If consumer incomes increase, the demand for X will likely increase, leading to a rightward shift in the demand curve. This could cause an increase in both the equilibrium price and quantity of X.

However, if the price of oil (an input to the production of X) increases, it will lead to an increase in the cost of production for X. This could result in a leftward shift in the supply curve, which may counteract the increase in demand and lead to a decrease in the equilibrium quantity of X. The impact on the equilibrium price will depend on the magnitude of the shifts in the demand and supply curves.