What do you think is causing such rapid increase in price of books? Using supply and demand to explain

Economics Dec 13, 2020

What do you think is causing such rapid increase in price of books? Using supply and demand to explain.

Expert Solution

The increasing cost of generating books has caused a reduction in the supply. On the figure below, the decline in supply is given by the leftward change in the supply curve from SS to SS'. As a result, the equilibrium price of books increases from P to P' and the equilibrium quantity declines from Q to Q'.

Here, SS= Supply curve

DD= Demand curve

P = Equilibrium price

Q = Equilibrium quantity

SS' = New supply curve

P' = New equilibrium price

Q' = New equilibrium quantity

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