Increase in the price of skateboard wheels cause a decrease/no change in the demand of skateboards? (2 separate markets w/ 2 separate buyers) Would an increase in the price of skateboard wheels cause a decrease/no change in the demand of skateboards? (2 separate markets with 2 separate buyers)
Note: I'm going to be mainly focused on the demand curve and its shifting rather than supply curve and markets, etc. Trying to simplify the thing I'm trying to figure out here. I'm asking this question more to double-check, but I could be having a major inconsistency in my basic understanding.
So, let's say there's a skateboard-making company that buys skateboard wheels from another company in order to make its product (skateboards). Let's say that other company selling skateboard wheels to the skateboard-making company increases the price of its skateboard wheels. This would cause a movement along the demand curve where the skateboard-making company would decrease the quantity it demands of skateboard wheels. ( Here skateboard wheels are an intermediate good and this is a B2B market (Business to Business) by the way. So no regular consumers involved here! )
This would basically mean the skateboard-making company would have fewer skateboard wheels in its inventory, etc. Now onto the market for skateboards: this would not shift the demand curve to the left/inwards, right? Rather, the demand curve would be unchanged (not shifted left or right). Obviously, there would be a shortage of skateboard, but I'm not so focused on that. I'm just double-checking that for the first market I mentioned, the skateboard-making company was the buyer and due to a change in price there was a movement along the curve. In the second market I mentioned, we have regular people who buy skateboards as the buyers and other than there being a shortage in the number of skateboards being produced the demand curve wouldn't have shifted since they weren't directly affected by the change in the price of skateboard wheels. They still love buying skateboards and continue to do so (only they will be a bit disappointed to know there is a shortage of skateboards because of the skateboard wheel probably explicitly affected the skateboard-making company's quantity demanded)
Yes, I am aware the quantity demanded and demand (market/indiv. demand curve) is different. I've tried to be explicit in which one I am referring to above in my question.
Since there is no change in consumer preferences, the demand function will not change.
The firms supplying skateboards face increased costs due to the wheels being more expensive. This will alter their supply function and thus the equilibrium price in the skateboard market may change, and hence the equilibrium quantity demanded may also change.