a) Discuss the effects on the equilibrium price and quantity in the software market, when the...

a) Discuss the effects on the equilibrium price and quantity in the software market, when the price of computer hardware falls. (Please write down the discussion and also show the effects in diagrams.) b) Discuss the effects on the equilibrium price and quantity in the hardware market, when the price of computer software rises. (Please write down the discussion and also show the effects in diagrams.)

Expert Solution

a) Computer and software are complementary products when the price of the computer will fall the demand for the software will increase in the market. as people use computer and software together they will have enough money left with them after spending on the computer so they will demand more software. This will shift the software demand curve to the right at a higher cost and higher demand. In the below graph point "a" was the previous equilibrium in the software market after reduction in the price of computer increased demand will shift the demand curve to the right at a higher cost and higher quantity the new equilibrium will be "b".

b) Computers and hardware are also complementary to each other. Any decrease in the price of the computer will increase the demand for the hardware used with the computer as people are left with more money after buying a computer to spend it on hardware they will demand more. Just as the situation with software.

Rahul Sunny answered 2 years ago

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