Given the scenario below, indicate what happens to demand, supply, equilibrium quantity, and equilibrium price in a competitive market.Identify the determinant of demand and supply that causes the...
Given the scenario below, indicate what happens to demand, supply, equilibrium quantity, and equilibrium price in a competitive market.
Identify the determinant of demand and supply that causes the shifts
(a)Calculators. More schools require students to buy and use calculators; improved productivity shortens the time it takes to make calculators.
In this case, the equilibrium quantity would go up, but we cannot know for sure what will happen to the equilibrium price.
There will be an increase in the demand for calculators in this scenario. This can be called a change in consumer tastes as there has been a change in what consumers want/need.
There will also be an increase in the supply of calculators. This is because the cost of inputs goes down as the process of making calculators is made faster.
An increase in demand and an increase in supply both work to increase the equilibrium quantity of a product. However, they work in different ways on the price. An increase in demand pushes prices up, but an increase in supply lowers them. Therefore, we can't know what happens to equilibrium price unless we know how much demand goes up relative to supply.