Final answer:
Economic events such as rising household income and increased exercise tend to increase the equilibrium price of athletic shoes by increasing demand. Conversely, a decrease in the cost of plastic can lead to a decrease in the equilibrium price by increasing supply.
Step-by-step explanation:
When analyzing how economic events affect equilibrium price and quantity of goods, such as athletic shoes, we must consider changes in demand and supply using a four-step process. If household income has been rising, this typically leads to an increase in demand for normal goods, which would cause an increase in equilibrium price, assuming other factors remain constant. When the cost of a key input like plastic decreases, this leads to a decrease in production costs, which can cause the supply curve to shift outward, potentially leading to a lower equilibrium price and higher quantity. If consumers are exercising more, we would expect an increase in demand for athletic shoes, leading to a higher equilibrium price and higher quantity sold.
Changes in Demand and Supply
- Rising household income would generally increase demand for athletic shoes, leading to a higher equilibrium price.
- A decrease in the cost of plastic, which is an input in the production of athletic shoes, might lower production costs and could potentially increase supply, resulting in a decrease in the equilibrium price.
- In response to increased exercising among consumers, the demand for athletic shoes would likely increase, raising both the equilibrium price and quantity.