Suppose that the market for gluten-free spaghetti is in long-run equilibrium at a price of $3.50 per box and a quantity of 4 million boxes sold per year. Assume that the production of gluten-free spaghetti is a constant-cost industry. If the demand for gluten-free spaghetti increases permanently, which of the following combinations of equilibrium price and equilibrium quantity would you expect to see in the long run?

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Charlize Swanson

4 July, 02:13

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Adeline · Answer 1

After demand increases, and supply increases, the quantity will be more than 4 million boxes, but the price will return to its initial level.