Question

What should happen to the equilibrium price of whoopee cushions when the price of the rubber necessary to make the cushions declines?

Answer 1

Equilibrium price is the price where demand curve and the supply curve equate. That point is the point where market price and market quantity are determined.

In this case whoopee cushions and the rubber necessary to make them are complements. It means that rubber and whoopee cushions are directly related to each other. If the price of rubber declines, the demand for rubber by producers will increase and therefore quantity of whoopee cushions will also increase.

Hence equilibrium price of whoopee cushions will decrease because supply of whoopee cushions will increase.

Answer 2

The nature is that of a material which is necessary to create a product. And the cost of production.

Basically, an equilibrium price is described as the price where the demand and supply in a market are at level. When the quantity demanded and quantity supplied equate under a certain level of price and thus the equilibrium is set.

So according to this example, If whoopee cushions and rubber necessary to make them are the matter of concern one must know that these are complementary in nature, as in necessary, as in they have a joint relationship.

This will mean that rubber and whoopee cushions are directly related to each other. So if the price of rubber falls, the demand for rubber will increase ( according to general law of demand) This will further create impact of increase in quantity.

Hence equilibrium price of whoopee cushions will decrease due to supply of whoopee cushions rising.

Thanks for asking this question.

I hope that i helped.