Question: Is this correct? Another tutor said the demand for computers would rise, but as normal goods, don't they decrease in demand as income falls? That's
Is this correct? Another tutor said the demand for computers would rise, but as normal goods, don't they decrease in demand as income falls? That's what my book says. I need second opinions please, thanks!

used to make computers, how will the equilibrium price and output in the market for computers be affected? The buyers' drop in income is a change in an economic factor, which will cause a decrease in the quantity demanded at any given price. Computers are a normal good. A normal good is a good in which the quantity demanded falls as income falls. This will then shift the demand curve inward, to the left. When a tariff is placed on the imported computer parts it will increase the supplier's production cost of the computers. This will cause the supplier to earn lower profits at any selling price, which will cause them to supply a smaller quantity at any given price. This shifts the supply curve inward as well, to the left. Price (thousands of dollars per PC) Price (thousands of dollars per PC) X 3. 0 10 25 40 10 25 40 Quantity (millions of PCs per year) Quantity (millions of PCs per year) As the graph to the right depicts: The supplier would decrease the quantity supplied at any given price, shifting the S curve to the left; The consumers would demand less at any given price, and the D curve will shift to the left; and the price is ambiguous. What can be determined is that the equilibrium quantity has gone down
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
