Factors Affecting the Equilibrium Price of Greeting Cards

Understanding the Equilibrium Price of Greeting Cards

Greeting cards are a popular way to express emotions and well-wishes for special occasions such as birthdays, anniversaries, and holidays. The equilibrium price of greeting cards is determined by the intersection of the supply and demand curves in the market.

When the equilibrium price of greeting cards declines, while the equilibrium quantity increases, it indicates a shift in the market dynamics. Let's explore the factors that could be responsible for this change.

Possible Factors Affecting the Equilibrium Price of Greeting Cards

There are various factors that could influence the equilibrium price of greeting cards. One of the following options would most likely be responsible for the scenario described:

1. Decrease in the price of paper used to make greeting cards
2. Decrease in the demand for greeting cards
3. Decrease in supply and an increase in demand for greeting cards
4. An effective advertising campaign by the greeting card industry

Analysis and Explanation

The most likely factor responsible for a decline in the equilibrium price of greeting cards, along with an increase in the equilibrium quantity, is a decrease in the price of paper used to make greeting cards. This external factor affects the production cost of greeting cards, leading to a lower price for consumers.

Under normal market conditions, an increase in the equilibrium quantity of greeting cards would result in a higher price. However, in this specific scenario, the decrease in the price of paper plays a key role in lowering the overall price of greeting cards.

Suppose that the equilibrium price of greeting cards declined at the same time the equilibrium quantity of greeting cards increased. Which one of the following would most likely be responsible?

The answer is: A) A decrease in the price of paper used to make greeting cards.