What happens in the market for personal computer is the price of computer chips falls and the price of retail software increases?

a. If the price of computer chips falls, the cost of producing computers declines. As a result, the supply of computers shifts to the right, as shown in Figure 22. The new equilibrium price is lower and the new equilibrium quantity of computers is higher.

How would the equilibrium price and quantity change in the market for computers if the price of computers goes up?

Because computer software is a complement to computers, the lower equilibrium price of computers increases the demand for software. As Figure below shows, the result is a rise in both the equilibrium price and quantity of software.
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Price Quantity Demanded Quantity Supplied
6 81 81
7 68 98
8 53 110
9 39 121

Are computers and software complements or substitutes?

Software is used in computers, so the two goods are complements. The technological advancement in computers would reduce the suppliers’ costs and increase the demand for both computers and software as these goods are demanded together.

What happens in the market for cream cheese if the price of milk goes up?

Since bagels and cream cheese are complements, the rise in the price of cream cheese would reduce the demand for bagels, as Figure 30 shows. … So a rise in the price of milk does cause both a rise in the price of cream cheese and a decline in the equilibrium quantity of bagels.

Which would cause a decrease in the quantity of computers supplied?

2. Which would cause a decrease in the quantity of computers supplied? … increase in the supply of gasoline.

When supply decreases what happens to price and quantity in equilibrium?

A decrease in supply will cause the equilibrium price to rise; quantity demanded will decrease.

How has the equilibrium in the market for cheese been affected by the price decrease of milk?

The price of milk, a key input for cheese production, rises, so that the supply decreases by 80 pounds at every price. A new study says that eating cheese is good for your health, so that demand increases by 20% at every price.
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Problems.
Price per Pound Qd Qs
$3.20 700 600
$3.40 650 650
$3.60 620 700
$3.80 600 720

Why market price rises when the price of the product is below the equilibrium price?

If the market price is below the equilibrium price, quantity supplied is less than quantity demanded, creating a shortage. The market is not clear. It is in shortage. Market price will rise because of this shortage.

How does a surplus affect the price of a product?

Whenever there is a surplus, the price will drop until the surplus goes away. When the surplus is eliminated, the quantity supplied just equals the quantity demanded—that is, the amount that producers want to sell exactly equals the amount that consumers want to buy.

How will the drop in the cost of shipping fish affect the equilibrium price and equilibrium quantity of fish?

Suppose the cost of shipping fish drops. How will this affect the equilibrium price and equilibrium quantity of fish? Equilibrium price decreases but equilibrium quantity increases. Feedback If the cost of transporting fish decreases, you would expect shipping firms to be able to transport more fish for the same price.

How would an increase in supply affect the equilibrium price in a market?

If there is an increase in supply for goods and services while demand remains the same, prices tend to fall to a lower equilibrium price and a higher equilibrium quantity of goods and services. … The same inverse relationship holds for the demand for goods and services.

How does equilibrium price and quantity change due to a decrease in demand answer due to a decrease in demand both equilibrium price and quantity <UNK>?

How does the equilibrium price and quantity change due to a shift in the demand curve and supply curve that is occurring at the same time? Answer: … If both demand and supply curves shift to the left, then equilibrium quantity decreases and equilibrium price may increase, decrease, or stay the same.

What must happen to the market price in order for a shortage to be eliminated?

What must happen to the market price in order for a shortage to be eliminated? The price must fall.

Which of the following will cause a rightward shift in the supply curve for tobacco?

A rightward shift of the tobacco supply curve means there is an increase in the supply of tobacco. An improvement in technology allows a producer to increase output with the same resources or to produce a given level of output with fewer resources.

How changes in demand and supply affect the equilibrium price and quantity and how this analysis can be applied?

A decrease in demand will cause the equilibrium price to fall; quantity supplied will decrease. An increase in supply, all other things unchanged, will cause the equilibrium price to fall; quantity demanded will increase. A decrease in supply will cause the equilibrium price to rise; quantity demanded will decrease.

How does a shortage affect the price of a product?

When the price of a good is too low, a shortage results: buyers want more of the good than sellers are willing to supply at that price. … If there is a shortage, the high level of demand will enable sellers to charge more for the good in question, so prices will rise.

When there is a shortage in a market prices are likely to?

When price is too low, the quantity demanded is greater than quantity supplied. This excess demand is known as a shortage. In this situation, the low price causes an excess of buyers.

When a shortage exists in a competitive market?

A Market Shortage occurs when there is excess demand– that is quantity demanded is greater than quantity supplied. In this situation, consumers won’t be able to buy as much of a good as they would like.

What is the effect of shortage?

A shortage is a situation in which demand for a product or service exceeds the available supply. When this occurs, the market is said to be in a state of disequilibrium. Usually, this condition is temporary as the product will be replenished and the market regains equilibrium.

Why is shortage important in economics?

Scarcity of goods and services is an important variable for economic models because it can affect the decisions made by consumers. For some people, the scarcity of a good or service means they cannot afford it. … Countries have different resources available to produce goods and services.

How shortage and surplus affect the economy?

When economic forces are not in balance, a surplus and shortage may be experienced. This causes disruptions in the market, and if not controlled, can lead to market disequilibrium. For markets, equilibrium is achieved through the supply at the prices at which the market demands.

What will happen if the price prevailing in the market is below the equilibrium price?

(ii) When price prevailing in the market is below the equilibrium price, demand will be more than supply, i.e., there is excess demand in the market. Pressure of excess demand will cause a rise in market price causing contraction of demand and extension of supply.

What happens when there is a shortage in a market quizlet?

There is a shortage in a market for a product when: the current price is lower than the equilibrium price. the current price is above the equilibrium level. cause changes in the quantities demanded and supplied that tend to eliminate the excess production or excess demand.

What is the definition of shortage costs?

Shortage costs are those costs that are incurred when a business runs out of stock, including: Time lost when raw materials are not available. Cost of shrinkage, pilferage and obsolescence.