Question

Stone and brick are substitutes in home construction. Consider the market for bricks depicted below. 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. Market for bricks price quantity d s equilibrium price decreases. May increase or decrease, but it is impossible to know for sure. Remains constant. Increases. Equilibrium quantity increases. Remains constant. May increase or decrease, but it is impossible to know for sure. Decreases.

Answer 1

There will be a rise in the demand for brick in the market due to the rise in the price of stone and there will be less demand for the stone in the market as stone and brick are substitute goods.

Further Explanation:

The stone and brick are substitutes of each other. The substitute goods have a direct relation of demand of one good with the price of the other substitute.When the price of the stone rises, the demand for brick will rise as, people can substitute stone by brick due to rise in the price of the stone. Brick will be cheaper in comparison with the price of the stone.

• The market for bricks equilibrium price will rise slowly when the demand rises.

• The equilibrium quantity will increase for sure, due to rise in the price of the stone, the demand or the quantity for brick will rise.  

• This situation of rise in the price of stone will lead to rise in the demand for brick and the demand curve will shift towards upward and this will increase the quantity of bricks sold in the market due to rise in the price of the substitute good (stone) due to new regulations.

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Answer Details:

Grade: High school

Chapter: Demand and supply

Subject: Economics

Keywords: Stone and brick are substitutes in home construction. Consider the market for bricks depicted below. 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. Market for bricks price quantity d s equilibrium price decreases. May increase or decrease, but it is impossible to know for sure. Remains constant. Increases. Equilibrium quantity increases. Remains constant. May increase or decrease, but it is impossible to know for sure. Decreases.

Answer 2

Answer: Price of bricks will increase and quantity will increase.

Explanation: Since Stone and bricks are substitutes to each other, a rise in the price of stone due to the new regulation will lead to a rise in the demand for bricks. Since bricks are now relatively cheaper as compared to stones after the price rise, people will use more bricks than stones. This will shift the demand for bricks to the right driving upwards the price for bricks and also increase the quantity of bricks being sold in the market.