Which statement about the computer chip market is TRUE?
A) An increase in productivity shifted the supply curve to the left, driving up the price.
B) Computer chip demand is estimated to be unit elastic, which explains why the market has not expanded as production technology has improved.
C) Productivity increases in computer chips caused revenues to increase over time because the demand for computer chips is elastic.
D) There are limited uses for computer chips so demand is inelastic.

Question

Quizplus · Accepted Answer

Increased productivity in the computer chip market caused revenues to increase over time, which suggests that demand for computer chips is elastic. This means that as the price of computer chips decreases due to increased productivity, demand for them increases proportionally, resulting in higher revenues. Option A is incorrect because an increase in productivity would shift the supply curve to the right, resulting in a decrease in price. Option B is also incorrect because improvements in production technology should result in an increase in supply, not a decrease in demand. Option D is incorrect because computer chips have a wide range of applications and are used in various industries, suggesting that demand is not limited or inelastic.

Which Statement About the Computer Chip Market Is TRUE