The initial supply and demand curves for a good are illustrated in the above figure. If there are technological advances in the production of the good, then the new equilibrium price for the good

Question

Quizplus · Accepted Answer

Technological advances in the production of the good will shift the supply curve to the right, meaning that more of the good can be produced at every price. This will lead to a new equilibrium point where demand intersects with the new, higher supply curve. Since supply has increased, the new equilibrium price will be lower than the original price of $6. Therefore, the correct choice is (C) - it is less than $6. Note that (D) is also technically correct since the new equilibrium price could be less than, equal to, or more than $6, but the most likely outcome given the information provided is for the price to be less than $6.

The Initial Supply and Demand Curves for a Good Are