We are analyzing the market for good Z. The price of a complement good, good Y, declines. At the same time, there is a technological advance in the production of good Z. Which point in figure is most likely to be the new equilibrium price and quantity?

Point 4

No worries! We‘ve got your back. Try BYJU‘S free classes today!

Point 5

No worries! We‘ve got your back. Try BYJU‘S free classes today!

Point 7

Right on! Give the BNAT exam to get a 100% scholarship for BYJUS courses

Point 8

No worries! We‘ve got your back. Try BYJU‘S free classes today!

Open in App

Solution

The correct option is D Point 7
Point 7.
As there is a decline in the price of the complementary goods demand will increase for good Z as well as Good Y and therefore the demand curve for good Z shifts to the right from D1 to D2. Technological advancement helps to reduce the cost of production and thereby increasing the supply of Good Z. The supply curve will shifts towards the right from S1 to S2. The new equilibrium of curves D2 and S2 is Point 7.

Suggest Corrections

Similar questions

Q. Assume X is a normal good. Holding everything else constant, assume that income rises and the price of a factor of production also increases. What point in Figure is most likely to be the new equilibrium price and quantity?

Q. Market for a good is in equilibrium. What is the effect on equilibrium price and quantity if both market demand and market supply of the good increase in the same proportion? Use diagram.

If the price of a good increases while the quantity of the good exchanged on markets decreases, then the most likely explanation is that there has been

If the price of a good decreases while the quantity of the good exchanged on markets decreases, then the most likely explanation is that there has been

Q. Questions are based on the demand and supply diagrams in Figure

D_{1}

and

S_{1}

are the original demand and supply curves

D_{2}, D_{3}, S_{2}

and

S_{3}

are possible new demand and supply curves. Starting from initial co librium point (1) what point on the graph most likely to result from each change?

\to

A government research agency has published outcome of studies which say that consumption of good X could cause cancer. In addition, assume that a powerful lot has persuaded the government to give subsidy to the manufacturers of good X. what point in Figure is most likely to be the new equilibrium price and quantity?

Join BYJU'S Learning Program