Question

Answers to the following with explanations?

for each of the following simultaneous changes in demand and in supply for a product, indicate the effect on equilibrium price and equilibrium quantity

A. The population increases and new technology improves efficiency

B. Cost of a substitute decreases as cost of production rises

C. Price of a complement decreases as number of sellers in the market decreases

Answer 1

A. The increase in population will result in an increase in demand and the improvement in technology will result in an increase the quantity supplied. Hence there would be a simultaneous increase in quantity supplied and quantity demanded.

B. The demand for quantity will fall with the increase in cost of production. The quantity supplied will fall with the rise in cost of production.

C. With the decrease in the price of the complement, the quantity demanded will rise. However, the quantity supplied will increase as the number of sellers in the market fall.