Answer to Question #66570 in Economics for Nisha

Question

Suppose you are the manager of a chain of computer stores. For obvious reasons you have been closely following developments in the computer industry, you have just learned that The government has passed a two-prong program designed to further enhance the computer industry position in the global economy. The legislation provides increased funding for computer education in primary and secondary schools, as well as tax breaks for firms that develop computer software. As result of this legislation, what do you predict will happen to the equilibrium price and quantity of software?

Answer 1

It is logical to think that with a strengthen support of computer industry and computer education, a demand for both computer software is expected to be increased. With the existing level of its production and suddenly increased demand, its price will also increase. However, in some time the number of people seeking for greater income will become employed in this area while decreasing the price of software.