A new technology is announced which allows manufacturers to produce widgets for less. Widgets are a key input in the production of whatchamacallits. What would we expect to happen to the market for whatchamacallits?

Question

Quizplus · Accepted Answer

If the cost of producing widgets decreases due to the new technology, then the cost of producing whatchamacallits will also decrease, causing the supply curve for whatchamacallits to shift to the right. As a result, the equilibrium price will decrease, and the equilibrium quantity of whatchamacallits will increase. Therefore, the correct answer is D - the supply curve would shift right.

A New Technology Is Announced Which Allows Manufacturers to Produce