If Charmin discovered a new, cheaper, production method for toilet paper would this, ceteris paribus, be reflected as a change in demand or a change in supply in the market for Charmin toilet paper - a normal good? Explain. Be sure to clearly identify a textbook variable or determinant that is causing this change. Would this change be an increase or decrease? Explain. Would this change result in a surplus or in a shortage in the market for Charmin toilet paper? Explain. Given this surplus or shortage, how will a new equilibrium be established? What do you predict will happen to the equilibrium price and the equilibrium quantity exchanged in the market for Charmin toilet paper? Explain.
If Charmin discovered a new, cheaper, production method for toilet paper would this, ceteris paribus, be reflected as a change in
Answer -
Normal Good :- Normal goods are the goods whose demand increases with decrease in price and demand will decrease with increase in price.
Now,
As the with help of new technology the production of toilet papers become cheaper which means this lead to increase in the supply . As supply of toilet papers increases this lead to decrease in the price of toilet papers.As the price of toilet paper decreases this will lead to increase in demand of toilet which is the property of normal good. So, yes we can conclude that toliet papers are normal good.
Here determinats will be price and quantity as price decreases the quantity will increases. So, price is decreasing as supply increases.
As supply will increase this will lead to shortage of Charmin toliet papers as demand for the toliet papers have increased.As supply increases this will lead to decrease in the price but as the demand for the toliet papers increases this will lead to increase in price so, new equilibrium price will be lower and equilibrium quantity will be higher than before .
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