Asked by Alyssa Palmer on May 06, 2024
Verified
Identify the effect of a reduction in the price of steel on the equilibrium price and quantity of automobiles,for a given demand curve.
A) An increase in both equilibrium price and equilibrium quantity
B) A decrease in both equilibrium price and equilibrium quantity
C) An increase in equilibrium price and a decrease in equilibrium quantity
D) A decrease in equilibrium price and an increase in equilibrium quantity
E) An increase in equilibrium price but no change in equilibrium quantity
Price of Steel
The price of steel is the cost for a specific weight or quantity of steel, a crucial material in construction, manufacturing, and infrastructure projects, influenced by factors such as market demand, production costs, and global economic conditions.
Equilibrium Price
The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers, resulting in a stable market condition without surplus or shortage.
Equilibrium Quantity
The quantity of goods or services that is supplied and demanded at the equilibrium price, where the amount sellers are willing to sell equals the amount buyers are willing to buy.
- Learn the theory of market equilibrium and the impact of varying supply and demand on the equilibrium price and quantity.
- Comprehend the influence of manufacturing costs and factors of production on supply within the market.
- Examine market patterns to ascertain how alterations in supply and demand affect the directional change in equilibrium price and quantity.
Verified Answer
RG
Resheemha GermanMay 13, 2024
Final Answer :
D
Explanation :
A reduction in the price of steel, a key input in automobile production, would lead to a decrease in production costs for automobile manufacturers. This would result in a rightward shift of the supply curve for automobiles, as producers would be willing and able to supply more automobiles at each price level. Given the same demand curve, this would lead to a decrease in equilibrium price and an increase in equilibrium quantity.
Learning Objectives
- Learn the theory of market equilibrium and the impact of varying supply and demand on the equilibrium price and quantity.
- Comprehend the influence of manufacturing costs and factors of production on supply within the market.
- Examine market patterns to ascertain how alterations in supply and demand affect the directional change in equilibrium price and quantity.