Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods. Other things constant, this law would cause a. an increase in the supply of piercings and a lower price for piercings. b. an increase in the supply of piercings and a higher price for piercings. c. a decrease in the supply of piercings and a higher price for piercings. d. a decrease in the supply of piercings and a lower price for piercings.

Question

Elizabeth Wood

Business

24 February, 12:30

Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods. Other things constant, this law would cause a. an increase in the supply of piercings and a lower price for piercings. b. an increase in the supply of piercings and a higher price for piercings. c. a decrease in the supply of piercings and a higher price for piercings. d. a decrease in the supply of piercings and a lower price for piercings.

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Answers (1)

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Daniel Humphrey · Answer 1

The correct answer is option c.

Explanation:

Tougher licensing tests and costly sterilization will increase the cost of production for the piercing studios. The studios will be able to supply a lesser quantity of piercings at the same cost. This will cause the supply curve of piercings to move to the left.

This leftward shift in the supply curve would cause the equilibrium price of piercings to increase and the equilibrium quantity to decrease.