This increase in demand results in a rise in the price of


Find the flaws in the reasoning in the following statements, paying particular attention to the distinction between shifts of and movements along the demand and supply curves. Draw a diagram to illustrate what actually happens. (a) "A technological revolution that lowers the cost of producing a good might at first result in a reduction in the price of the good to consumers. But a fall in price will increase demand for the good, and higher demand will send the price up again. It is not certain, therefore, that an innovation will really reduce price in the end." (b) "A study shows that eating a clove of garlic a day can help prevent heart disease, cause consumers to demand more garlic. This increase in demand results in a rise in the price of garlic. Consumers, seeing that the price of garlic has gone up, reduce their demand for garlic resulting in a fall in the price of garlic. Therefore, the ultimate effect of the study on the price of garlic is uncertain."

Solution Preview :

Prepared by a verified Expert
Business Management: This increase in demand results in a rise in the price of
Reference No:- TGS01559371

Now Priced at $25 (50% Discount)

Recommended (99%)

Rated (4.3/5)