Question

Companies that make MP3 players have found a way to decrease the costs of making MP3 players. What will happen to the equilibrium quantity? a. increase b. decrease c. stay the same

Answer 1

When the cost to produce MP3 players decreases, this can be viewed as an increase in supply. In economic terms, an increase in supply typically results in an increase in the equilibrium quantity because there is a higher quantity of the product in the marketplace.

Step-by-step explanation:

Your question pertains to the impact on the equilibrium quantity when companies find a way to decrease the cost of making MP3 players. This situation is an example of an increase in supply, because when the cost to produce a good decreases, manufacturers can afford to produce more of it.

In the context of supply and demand economics, if there is an increase in supply (which results from cost reductions allowing more products to be produced), the equilibrium quantity generally increases. The reason is that producers are willing and able to sell more of the product at each possible price, so this results in a higher quantity of the product in the marketplace.

Learn more about Supply and Demand