In this market for tablet computers, more suppliers enter the market and the price of laptops, a substitute good, increases, while all other factors remain constant. Explain the change(s) in the equilibrium price and quantity.
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Step 1. Draw a demand and supply model before the economic change
took place. To establish the model requires four standard pieces of
information: The law of demand, which tells us the slope of the demand
curve; the law of supply, which gives us the slope of the supply curve;
the shift variables for demand; and the shift variables for supply. From
this model, find the initial equilibrium values for price and quantity.
Step 2. Decide whether the economic change being analyzed affects
demand or supply. In other words, does the event refer to something in
the list of demand factors or supply factors?
Step 3. Decide whether the effect on demand or supply causes the
curve to shift to the right or to the left, and sketch the new demand or
supply curve on the diagram. In other words, does the event increase or
decrease the amount consumers want to buy or producers want to sell?
Step 4. Identify the new equilibrium and then compare the original
equilibrium price and quantity to the new equilibrium price and
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Sep 24th, 2015
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