Assume that the price of rubber increased at the same time that Michael Jordan,

Question

Assume that the price of rubber increased at the same time that Michael Jordan, arguably the best NBA basketball player of all time, became famous. What do you expect to happen to the equilibrium price and equilibrium quantity of the basketball shoes that are promoted by Michael Jordan?

Question 15 options:

Equilibrium price will go up and equilibrium quantity will go down.

Equilibrium price will go up and equilibrium quantity will go up.

Equilibrium price will go down and equilibrium quantity will be indeterminate.

Equilibrium price will go down and equilibrium quantity will go up.

Equilibrium price will go up and equilibrium quantity will be indeterminate.

Equilibrium price will go up and equilibrium quantity will go down.

Equilibrium price will go up and equilibrium quantity will go up.

Equilibrium price will go down and equilibrium quantity will be indeterminate.

Equilibrium price will go down and equilibrium quantity will go up.

Equilibrium price will go up and equilibrium quantity will be indeterminate.

Explanation / Answer

Increase in price of rubber (an input of making shoes) causes the supply of basketball shoes to fall (as cost to suppliers increases) shifting the supply curve leftward in the basketball shoe market. On the other hand, demand for basketball shoes will increase as it is promoted by famous player. This will shift the demand curve rightward. The result of these shifts is equilibrium price will increase but the equilibrium quantity (wheather it increases, decrease, or remains same) depends on the magnitude of the shift. Therefore, equilibrium quantity will be indetrminate.

Answer- option 5 : equilibrium price will go up and equilibrium quantity will be indetrminate.

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