Question
If there is a new breakthrough in manufacturing technology that reduces the cost of producing cell...
If there is a new breakthrough in manufacturing technology that reduces the cost of producing cell phones by half, what will happen the following four parts of supply and demand:
a. supply of cellphones
b. demand for cellphones
c. price and sale (quantity sold) of cellphones
d. demand for cellphones apps
explain in detail what happens in both the market for cellphones and cellphone apps using terms such as "shifts in demand left or right" or "supply shifts".
Homework Answers
Answer #1
a), b) and c)
Supply of cellphones would increase at every price level (right shift of supply curve)
Demand for cellphones remains the same
Price (equilibrium) would fall and quantity (equilibrium) would increase. (refer to the diagram below)
d) Demand for cellphone apps would increase (substitute product, demand curve shifts to the right when price of cellphones decreases)
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