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The computer market in recent years has seen many more computers sell at much lower prices. What shift in demand or supply is most likely to explain this outcome? Sketch a demand and supply diagram and explain your reasoning for each.

a) Demand
b) Supply
c) Both Demand and Supply
d) Neither Demand nor Supply

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Final answer:

The increase in computer sales at lower prices is most likely due to an increase in supply, shown by a rightward shift of the supply curve in a demand and supply diagram, indicating greater availability at lower prices.

Step-by-step explanation:

The recent trend in the computer market towards higher sales at lower prices can be explained by a shift in supply. A likely cause for this outcome would be technological advances, production efficiency improvements, or a decrease in input costs, which can increase the overall supply of computers.

When we draw a demand and supply diagram, an increase in supply is represented by a shift of the supply curve to the right. Holding demand constant, the increased supply would lead to a lower equilibrium price and a higher equilibrium quantity, explaining the scenario of more computers sold at lower prices.

On the other hand, a rise in demand, indicated by a rightward shift of the demand curve, would typically increase prices along with the quantity sold. Since the question mentions lower prices, a rise in demand alone isn't a reasonable explanation. However, if both demand and supply increase, the final effect on price would depend on the relative shifts of both curves.

A price floor affects the market by setting a legal minimum price and does not directly shift the demand or supply curve. Instead, it can create a surplus if set above the equilibrium price.

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