Answer to Question #230552 in Microeconomics for lovely

Question

There is a market of computer i.e. there is some demand and supply of computer. Shown in a diagram the effect on the demand and supply curve, the equilibrium price and the equilibrium quantity if “THE SALARIES OF ELECTRONIC TECHNICIAN GO UP”. (Explain also in words).

Answer 1

Solution:

When the salaries of electronic technicians go up, this means that the production costs for the computers will go up, which will ultimately push the prices of the computers up. As a result of the computer's price increase, their quantity demanded will fall since most consumers will not be able to afford them at those high prices or will prefer other cheaper substitutes whose prices have not changed.

 

The demand curve will shift inwards or to the left and the equilibrium point will move from the original E₀ to E₁. The equilibrium price (P₀) will increase to P₁, while the equilibrium quantity (Q₀) to Q₁ will decrease from

 

This is displayed in the below graph: