Question

Stone and brick are substitutes in home construction. Suppose the price of stone increases due to new regulations for the stone quarrying industry. Illustrate the impact this will have on the market for bricks. 1. The Brick Market, Equilibrium price:_______.a. increases.b. decreases.c. remains constant.d. change is ambiguous. 2. Equilibrium quantity:_______. a. increases.b. decreases.c. remains constan. d. change is ambiguous.

Answer 1

Answer:

1. The Brick Market, Equilibrium price: A) INCREASES

2. Equilibrium quantity: A) INCREASES

Explanation:

When the price of a good A increases, the quantity demanded for its substitute good B increases. This situation eventually will lead to a new equilibrium price which matches the price of both goods. The substitute good B's equilibrium price and quantity will increase, and the price of the good A should decrease due to lower demand.