Question

In early 2009 the price of computer memory chips rose. In a demand and supply model,...

In early 2009 the price of computer memory chips rose. In a demand and supply model, shifts in what curve(s) could have brought about the higher price?

Homework Answers

Answer #1

Sol :

The Price of Computer memory chips rose in 2009.

This can be done in any of two ways :

  1. Increases In demand , Or
  2. Decreases in Supply

INCREASE IN DEMAND :

  • If the demand increases of the goods due to any factors other than price , then it will lead to shift the demand curve.
  • So, if the demand increases for the product , then demand curve must shift to the RIGHT.
  • Shift in the demand curve will create a situation of excess demand in the market. It will put a pressure on the prices and will increase the prices.
  • Shift in Demand curve to the right , will create a new equilibrium at a point of higher PRICE AND QUANTITY.

DECREASE IN SUPPLY :  

  • If the supply decreases due to any factor other than the prices , it will lead to shift the supply curve
  • When the supply of the goods decreases , it will shift the supply curve to the LEFT.
  • Shift in supply curve to the left , will create a situation of excess demand over supply in the market, which will put a pressure on the prices and will increase the prices.
  • Shift in supply curve to the left , will make a new equilibrium at HIGHER PRICES AND LOWER QUANTITY.
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