Consider the market for shampoo, which starts at an equilibrium. Suppose that over the long-run, the shampoo market experiences two major industry shocks.
First, the latest research prompts dermatologists to recommend that consumers reduce the frequency they shampoo their hair, citing several negative side effects including dry scalp, dry hair, dandruff and potential hair loss. Secondly, shampoo manufacturers find that the cost of the main ingredient of shampoos, sodium lauryl sulfate (SLS) increases unexpectedly for an extended period of time.
How does the new, long-run market equilibrium compare to the initial market equilibrium?
Group of answer choices
- P increases, Q increases
- P decreases, Q decreases
- P increases, Q decreases
- P decreases, Q increases
- P change is ambiguous, Q change is ambiguous
- P increases, Q change is ambiguous
- P decreases, Q change is ambiguous
- P change is ambiguous, Q increases
- P change is ambiguous, Q decreases