Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium.Subsequently,an increase in population increases the demand for haircuts.In the short run,the market price will _ and the output of a typical firm will _.

A) rise;rise
B) rise;fall
C) fall;rise
D) fall;fall

Question

Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium.Subsequently,an increase in population increases the demand for haircuts.In the short run,the market price will _____ and the output of a typical firm will _____.

A) rise;rise
B) rise;fall
C) fall;rise
D) fall;fall

Aishath Haifa · Accepted Answer

Final Answer : A, Explanation :  An increase in population will shift the demand curve for haircuts to the right,resulting in a temporary shortage at the original equilibrium price.According to the laws of supply and demand,this shortage will cause the price to rise in the short run.Each firm in the market will experience an increase in the quantity demanded for their services,which will cause them to increase their output. Therefore, both price and output of a typical firm will rise in the short run.

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