Determinenator
New member
Question is at the very bottom. Number 1 & 2, I have already completed.
1.A change in the price of the Garmin GPS will cause a change in demand. If the Garmin GPS prices decrease, TomTom will lose sales (demand) for their units to Garmin GPS. Therefore consumers will buy the Garmin GPS before the TomTom GPS due to opportunity cost. Supply is not impacted at all. The drop in demand for the TomTom GPS would result in a surplus. Imagine yourself in the situation; there are 100 pieces of goods for sale in the market: normal demand= e.g. 80 pieces sold; 20 pieces unsold. Normal demand means that the quantity supplies are equal to the quantity demanded of the good. Decreased demand= e.g. 10 pieces sold; 90 pieces unsold. This means that 90 pieces are left in the market. As a result, there is a surplus: lesser people are willing and able to buy and there are more pieces left in the market. To establish a new equilibrium the TomTom GPS Market would have to lower their prices to compete with the Garmin GPS and to create neither a shortage nor a surplus, therefore the quantity demand and quantity supplied at the equilibrium price would be a competitive market.
2. A change in the price of microchips needed to produce the GPS will cause an increase in demand. The manufacturer will be able to produce the units cheaper. He will then be able to reduce the price. At a reduced price more people will be willing to buy the product (increase in demand). The manufacturer will then increase production (increase supply) to meet the new demand and maximize profit.
3. If the change in #1 and the change in #2 happened in concert (at exactly the same time), what do you predict will happen to the equilibrium price and equilibrium quantity exchanged of the TomTom GPS?
1.A change in the price of the Garmin GPS will cause a change in demand. If the Garmin GPS prices decrease, TomTom will lose sales (demand) for their units to Garmin GPS. Therefore consumers will buy the Garmin GPS before the TomTom GPS due to opportunity cost. Supply is not impacted at all. The drop in demand for the TomTom GPS would result in a surplus. Imagine yourself in the situation; there are 100 pieces of goods for sale in the market: normal demand= e.g. 80 pieces sold; 20 pieces unsold. Normal demand means that the quantity supplies are equal to the quantity demanded of the good. Decreased demand= e.g. 10 pieces sold; 90 pieces unsold. This means that 90 pieces are left in the market. As a result, there is a surplus: lesser people are willing and able to buy and there are more pieces left in the market. To establish a new equilibrium the TomTom GPS Market would have to lower their prices to compete with the Garmin GPS and to create neither a shortage nor a surplus, therefore the quantity demand and quantity supplied at the equilibrium price would be a competitive market.
2. A change in the price of microchips needed to produce the GPS will cause an increase in demand. The manufacturer will be able to produce the units cheaper. He will then be able to reduce the price. At a reduced price more people will be willing to buy the product (increase in demand). The manufacturer will then increase production (increase supply) to meet the new demand and maximize profit.
3. If the change in #1 and the change in #2 happened in concert (at exactly the same time), what do you predict will happen to the equilibrium price and equilibrium quantity exchanged of the TomTom GPS?