Question

suppose you are the manager of a chain of computer stores. For obvious reasons you have been closely following developments in the computer industry, and you have just learned that congress has passed a two-pronged program designed to further enhance the U.S. computer industry’s position in the global economy. Illustrate price determination in a competitive market and show how equilibrium changes in response to changes in determinants of Supply.

Answer 1

The approach towards enhancing the position of the US economy through furthering the growth of computer industry will be based on boosting investment and supply in the industry. This may be done through providing incentives to invest and expand production in the computer industry. By making the environment more investor friendly, the cost of production can be reduced considerably, increasing investment in the sector. The other approach is to increase the productivity in the industry through skilling programs and technological advancement. Both these approaches will increase the supply of computers in the economy, thereby boosting the economy. This will happen through the rightward shift of the supply curve, increasing the equilibrium quantity of computers and reducing the equilibrium price. This is shown in the figure below.