Question

A large increase in the supply of smart TVs occurs simultaneously with a smaller decrease in its demand. As a result, the equilibrium price will?

1) Increase
2) Decrease
3) Remain unchanged
4) Cannot be determined

Answer 1

In the scenario where there is a large increase in the supply of smart TVs along with a smaller decrease in its demand, the equilibrium price will decrease.

Step-by-step explanation:

In the scenario where there is a large increase in the supply of smart TVs along with a smaller decrease in its demand, the equilibrium price will decrease.

This is because the increase in supply, prompted by new technology or economies of scale, results in a surplus of smart TVs in the market. To sell the excess supply, sellers will lower the prices, causing the equilibrium price to decrease.

For example, if the original equilibrium price was $500, the decrease in demand may cause sellers to lower the price to $400 to attract buyers.