The computer market in recent years has seen many more...

Name: Problem 54, Chapter 3: Principles of Macroeconomics for AP Courses
Uploaded: 2020-05-19T22:22:50-08:00
Duration: 5 min 4 s
Channel: Yang Su
Description: 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. A rise in demand b. A fall in demand c. A rise in supply d. A fall in supply

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. A rise in demand b. A fall in demand c. A rise in supply d. A fall in supply

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. A rise in demand
b. A fall in demand
c. A rise in supply
d. A fall in supply

Key Concepts

Market Equilibrium

Market equilibrium is the point where the demand and supply curves intersect, indicating the price and quantity at which the market clears. When either the demand or supply curve shifts, the equilibrium changes, affecting both the price and quantity in the market.

Shifts in Demand

A shift in the demand curve happens when non-price factors such as consumer income, preferences, or prices of related goods change. A rightward shift signifies higher demand, while a leftward shift indicates lower demand. These shifts can alter the equilibrium price and quantity independently of supply changes.

Supply and Demand Model

This model provides a fundamental framework for understanding how prices and quantities are determined in a market. It explains that the interaction between the supply curve (seller behavior) and the demand curve (buyer behavior) establishes the market equilibrium, where the quantity supplied equals the quantity demanded.

Shifts in Supply

A shift in the supply curve occurs when a non-price determinant of supply, such as production technology or input costs, changes. An increase in supply is represented by a rightward shift in the supply curve and typically leads to a lower equilibrium price and a higher quantity sold in the market.

Transcript

00:01 Hello, so in this question, we are going to investigate the following questions.

00:06 The computer market in recent years has seen many new computers sell at much lower prices.

00:13 And we want to know what shift in demand or supply is most likely to explain this outcome.

00:20 And for this question, there are four scenarios provided.

00:25 And what we are going to do is to verify if each of the scenario occurs, will match with the scenario that we see, which is more computers are sold at a much lower prices.

00:39 So to begin, because there are four scenarios, i will draw four supply and demand curves.

00:48 So let's consider the first scenario.

00:51 And let's suppose that we are originally at an equilibrium of the computer market.

01:00 This is supply, this is demand.

01:03 And this is our original quantity at equilibrium, and this is our original equilibrium price.

01:19 And our first scenario is there is a rise in demand.

01:29 So when there's a rise in demand, it means that for every price, the quantity demand is higher, right? so that means we have a shift of the demand curve to the right.

01:42 And when there's a shift of demand curve to the right, if we look at the new equilibrium, we see that quantity demand is greater.

01:53 However, quantity supply is also greater, right? because there are more demand in the market, people are willing to pay at higher prices, and also there are more computers being sold.

02:07 But this is not, it does not match with the scenario that we observe which are more computers sold but they are at lower prices.

02:16 So a is not the answer, right? let's look at the second scenario.

02:25 And again, we start with an original equilibrium, supply demand, original equilibrium quantity, original equilibrium price.

02:42 Our second scenario is there is a fall in demand...

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