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

The increase in the salaries of the electric technicians is an increase in the cost of production of computers hence it will cause a left shift of the supply curve from S to S1. The price of computers will increase from P to P1 leading to a reduction in the number of computers demanded in the market from Q to Q1. Consequently, the market equilibrium will also move upwards.