Question

MANAGERIAL ECONOMICS WITH THE AID OF APPROPRIATE DIAGRAMS, ILLUSTRATE THE EFFECTS OF SIMULTANEOUS CHANGES IN INCOME...

MANAGERIAL ECONOMICS

WITH THE AID OF APPROPRIATE DIAGRAMS, ILLUSTRATE THE EFFECTS OF SIMULTANEOUS CHANGES IN INCOME AND TECHNOLOGY ON DEMAND AND SUPPLY

Homework Answers

Answer #1

1. With the increase in income people would have more money to spend which increases the demand thus shifts the demand curve to right and hence the price increases

2. Now with the advancement of technology, the supply increases which shifts the supply curve to right thus reducing the price
So with the increase in income and technology the price comes back to earlier level and with higher quantity which increases consumption. In the above graph the quantity increases from Q to Q2 levels with price level remaining at earlier P level.

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