Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The supply curve shifts to the right, lowering the equilibrium price.
B
The supply curve shifts to the left, raising the equilibrium price.
C
The demand curve shifts to the right, raising the equilibrium price.
D
There is no change in the equilibrium price or quantity.
Understanding the Answer
Let's break down why this is correct
Answer
When production costs fall, the supply curve shifts rightward because firms can produce more phones at each price. This shift lowers the equilibrium price while raising the equilibrium quantity, assuming demand stays the same. The lower price makes smartphones more attractive, so consumers buy more, and the market moves to a new equilibrium with a higher quantity sold. For example, if the cost drop lets manufacturers sell a phone for $300 instead of $350, the price might fall to $280 and sales could rise from 10 million to 15 million units. The overall effect is a cheaper, more plentiful market.
Detailed Explanation
When the new technology cuts production costs, producers can make more phones for the same price. Other options are incorrect because A leftward shift of supply would mean producers make fewer phones at each price, which would raise prices; Demand is how much buyers want to buy.
Key Concepts
Market Equilibrium
Supply and Demand
Cost of Production
Topic
Market Equilibrium Analysis
Difficulty
easy level question
Cognitive Level
understand
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