Suppose that the market for computers is initially in equilibrium. Further suppose that there is an increase in the price of computer software. The equilibrium price will fall; the equilibrium quantity will rise.

Question

Quizplus · Accepted Answer

An increase in the price of computer software would likely increase the cost of producing computers, leading to a decrease in supply and an increase in price. The equilibrium price would rise, not fall. The effect on equilibrium quantity would depend on the relative magnitudes of the shifts in supply and demand. An increase in the price of computer software will cause a shift in the supply curve for computers, not a movement along the demand curve. This will result in a new equilibrium with a higher price and a lower quantity than the initial equilibrium. So, the equilibrium price will rise, and the equilibrium quantity will fall.

Suppose That the Market for Computers Is Initially in Equilibrium