Question

What might happen to the equilibrium price and quantity of MacBooks if the price of silicon (which goes into the production of microchips) were to increase; while, at the same time, the price of PC laptops (a substitute for MacBooks) also increased

Answer 1

Equilibrium price would increase and the effect on equilibrium quantity would be indeterminate.

Step-by-step explanation:

The increase in the cost of silicon increases the cost of production and as a result supply falls. A fall in supply leads to fall in quantity and a rise in price.

If the price of PC laptops increases, the demand for MacBooks would increase. The increase in demand for MacBooks would increase quantity and price.

Taking these two occurrences together, the effect on equilibrium price would be an increase while on equilibrium quantity it would be indeterminate.

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