If the production technology of computers improves and at the same time the number of consumers willing and able to buy computers increases, which of the following will definitely occur?I. Equilibrium quantity will increase.II. Equilibrium price will decrease.III. Supply curve will shift to the right.IV. Demand curve will shift to the right.V. Equilibrium quantity will remain the same.Elimination ToolSelect one answerAI and II only.BI and III only.CI and IV only.DI, III, and IV only.EV only.
Question
If the production technology of computers improves and at the same time the number of consumers willing and able to buy computers increases, which of the following will definitely occur?I. Equilibrium quantity will increase.II. Equilibrium price will decrease.III. Supply curve will shift to the right.IV. Demand curve will shift to the right.V. Equilibrium quantity will remain the same.Elimination ToolSelect one answerAI and II only.BI and III only.CI and IV only.DI, III, and IV only.EV only.
Solution
The answer is D. I, III, and IV only.
Here's why:
I. Equilibrium quantity will increase: This is likely to occur because an improvement in production technology (which increases supply) and an increase in the number of consumers willing and able to buy computers (which increases demand) both contribute to an increase in the equilibrium quantity.
II. Equilibrium price will decrease: This is not necessarily true. While an improvement in production technology (which increases supply) can lead to a decrease in price, an increase in the number of consumers (which increases demand) can lead to an increase in price. Therefore, the overall effect on price is uncertain.
III. Supply curve will shift to the right: This is true. An improvement in production technology means that more computers can be produced at the same cost, which shifts the supply curve to the right.
IV. Demand curve will shift to the right: This is also true. An increase in the number of consumers willing and able to buy computers increases demand, which shifts the demand curve to the right.
V. Equilibrium quantity will remain the same: This is not true. As explained in point I, both an increase in supply and demand will lead to an increase in the equilibrium quantity.
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