“As more people buy computers, the demand for Internet service increases and the price of Internet service decreases. The fall in the price of Internet service decreases the supply of Internet service.” Is this statement true or false?

3.a) “As more people buy computers, the demand for Internet service increases and the price of Internet service decreases. The fall in the price of Internet service decreases the supply of Internet service.” Is this statement true or false? Explain.

3.b) What is the effect on the equilibrium in the maple juice market if maple juice becomes less popular and a more expensive robot is used to pick maple fruits? Explain with words + graph

Expert Solution

a.The given statement is true

As per the law of demand there is is indirect relation between demand and price of any commodity or services (making other things remaining constant).

On the other hand as per law supply,there is positive or direct relation between supply and prices of any product( other variables that affect supply held constant)

That is why if demand for Internet Services increases, the price will decrease and if there is fall in price of internet services there would be decrease in the supply of Internet Services.

B. The mapple juice become less popular leads to decrease in the demand of Mapple juice which shift the demand curve of Mapple juice leftward.

On the other hand the introduction of expensive robot used to pick Mapple fruits will shift supply curve to right as the application of Advanced technology increase the supply, reduce the input cost of production.Technologycal advancement improve the production efficiency which lead the supply curve to shift rightwards.

A decrease in demand and increase in supply will lead to fall of equilibrium and quantity cannot be determined.

In the above curve D1 is the new demand and S1 is the new supply and both demand and supply intersect at E1 that is new equilibrium. The equilibrium fall and price of mapple juice decrease whereas the quantity remains undetermined.

Rahul Sunny answered 2 years ago

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