The market for diamond rings is closely linked to the market for high-quality diamonds. If a large quantity of high-quality diamonds enters the market, then the Question 28 options: a) supply curve for diamond rings will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity. b) supply curve

b. supply curve for diamond rings will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity

Explanation:

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High-quality diamonds are an input used in the production of diamond rings. If the supply of high quality diamonds increases, it implies that the production of diamond rings would increase. As a result of the increased production, the supply curve would shift to the right. This would lead to an excess of supply over demand known as a surplus. This would cause equilibrium price to fall and quantity to rise.

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