Question

silicon is used for the manufacturing of semiconductor chips. at the end of last year a large new source of silicon has been discovered this year and the price of silicon has decreased by 15%. semiconductor chips are used in devices, cell phones, gaming systems, and this year many new devices are now using chips. if you were drawing a supply and demand graph to illustrate the changes to the semiconductor market since last year, what would you say has happened to the supply and demand curves and the equilibrium price and quantity this year?

Answer 1

The supply and demand graph for the semiconductor market would showcase a rightward shift in both the supply curve (due to the decrease in silicon price) and the demand curve (due to increased demand for semiconductor chips), affecting the equilibrium price and quantity.

Step-by-step explanation:

When drawing a supply and demand graph to illustrate the changes in the semiconductor market since last year due to a decrease in silicon prices and an increase in demand for devices with semiconductor chips, we would see specific movements in the supply and demand curves.

First, the discovery of a new large source of silicon that decreased the price by 15% would likely increase the supply of silicon. On the graph, this would be represented as a rightward shift of the supply curve. As a result of an increase in supply, the equilibrium price of silicon would decrease.

Secondly, with an increase in demand for devices utilizing semiconductor chips, the demand curve for semiconductors would shift to the right. This increase in demand, assuming the supply of semiconductors also increases to meet this greater demand, could see an increase in the equilibrium quantity of semiconductor chips, although the equilibrium price may increase or decrease depending on the relative changes in supply and demand.