Normally, a rise in the cost of production reduces supply, and a fall in the cost of production increases supply. In this case, an increase in wage rates implies that the cost of producing microcomputers has increased. Hence, the supply of microcomputers will fall.
The equilibriumThe equilibrium is the only price where quantity demanded is equal to quantity supplied.
The total number of units purchased at that price is called the quantity demanded. An increase in the price of a good or service almost always decreases the quantity demanded of that good or service. Conversely, a decrease in price will increase the quantity demanded.
A technological improvement that reduces costs of production will shift supply to the right, so that a greater quantity will be produced at any given price. Government policies can affect the cost of production and the supply curve through taxes, regulations, and subsidies.
Assuming that non-price factors are removed from the equation, a higher price results in a lower quantity demanded and a lower price results in higher quantity demanded. Thus, the price of a product and the quantity demanded for that product have an inverse relationship, as stated in the law of demand.
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.
Which would best explain a decrease in both the price and the quantity of a product over a period of time? The law of demand states that if price increases, other things being equal, the demand for the product will decrease.
Answer and Explanation: The correct option is: (c) A change in the market price of the good .
Supply of goods and services An increase in price almost always leads to an increase in the quantity supplied of that good or service, while a decrease in price will decrease the quantity supplied.
Which of the following factors will lead to a decrease in supply? An expectation of higher prices in the future.
Changes in Market Equilibrium Consider first a rightward shift in Demand. This could be caused by many things: an increase in income, higher price of a substitute good, lower price of a complement good, etc. Such a shift will tend to have two effects: raising equilibrium price, and raising equilibrium quantity.
A positive change in supply when demand is constant shifts the supply curve to the right, which results in an intersection that yields lower prices and higher quantity.