Suppose the number of buyers in a market decreases and a tec

Suppose the number of buyers in a market decreases and a technological advancement occurs also. What would we expect to happen in the market?

Question 62 options:

Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.

None of the above is correct.

Solution

If there is a reduction in the number of seller the quantity demanded will decrease and the demand curve shifts to the right. In the same there is the technological advancement so this will allow the firm to produce the good more cheaply so the supply increases and the supply curve will shift to the right. The obvious result is the reduction in the equilibrium price.

Ans. a) Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.