Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₂and S₂ (point E). If the technology to produce motorcycles improves and the number of buyers increases, how will the equilibrium point change? A) The equilibrium point will move from E to A. B) The equilibrium point will move from E to B. C) The equilibrium point will move from E to C. D) The equilibrium point will remain at E.

Question

Quizplus · Accepted Answer

With a technological improvement and an increase in the number of buyers, the supply curve will shift to the right (from SS1U1B12S1U1B0 to SS1U2B12S1U2B0) and the demand curve will shift up (from DS1U1B12 to DS2U1B12). As a result, the new equilibrium point will be at the intersection of DS2U2B12 and SS1U2B12S1U2B0, which is point C. Therefore, the equilibrium point will move from E to C.

Figure 3-8 -Refer to Figure 3-8. the Graph in This Figure Illustrates