Question

Suppose a group of competitive producers can produce two different goods (shovels and hammers) with basically the same resources. Most are currently producing many shovels and fewer hammers. The demand for hammers increases. What is likely to happen in the market for shovels

Answer 1

The demand for hammers increases is likely to happen in the market for shovels is described below in complete details.

Step-by-step explanation:

The equilibrium capacity will decline; the equilibrium price will decline.

Reason - The equilibrium capacity will decline as the market for shovels drop while the supply persists steadfast. And, the equilibrium price will also decline as there is a surplus capacity of shovels with an undersized market.