Question

Researchers have just discovered that antibacterial agents in toothpaste are harmful to human health. At the same time, the price of toothpaste-making equipment has fallen. What definitely happens in the toothpaste market after these events occur (i.e., what are the new equilibrium price and quantity of toothpaste

Answer 1

Answers are below:

Step-by-step explanation:

1. A discovery is made, which shows that antibacterial agents in toothpastes are harmful to human health. This kind of discovery definitely will discourage the purchase of toothpastes, in other words, expect the demand for toothpastes to fall.

2. Simultaneously, the price of machinery (a factor of production) used in making toothpastes falls. This means a fall in the cost of production. This fall will result in increased production and supply of toothpastes.

The result is that there will be a larger amount of toothpaste supplied but a lower amount of toothpaste demanded.

- The new equilibrium price of toothpaste will be lower; both due to a fall in the cost of production of toothpaste and a drop in the demand for it.

- The new equilibrium quantity supplied will be higher

- The new equilibrium quantity demanded will be lower