A new production technology reduces the cost of making tennis racquets. What are the likely results in the market for tennis racquets? 1) An increase in the supply of tennis racquets causing the equilibrium price to fall and the equilibrium quantity to rise. 2) An increase in demand caused by the lower price of tennis racquets. This will increase the equilibrium price and quantity of tennis racquets. 3) An increase in demand and a decrease in supply resulting in an increase in equilibrium price and quantity of tennis racquets. 4) A decrease in demand caused by the higher price of tennis racquets. This will increase the equilibrium price and quantity of tennis racquets.
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This means that the cost of production for tennis racquets has decreased. Show more…
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