ECONOMICS
TECHNOLOGY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The supply of CDs has increased.
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New technology has caused demand to fall.
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Higher taxes have caused supply to decrease.
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The quality of sound produced by CDs is poor.
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Detailed explanation-1: -Recall Why has the demand curve for CDs shifted to the left in recent years? The supply of CDs has increased.
Detailed explanation-2: -Both music CDs and downloading of digital music files are substitutes for each other. So when the price of downloading digital music files declines, the demand for music CDs will also decline as the substitute goods have a positive price elasticity of demand. Thus, the demand curve for music CDs will shift to the left.
Detailed explanation-3: -Answer and Explanation: The correct answer is C. A tax on cigarettes will shift the supply curve in and to the left.
Detailed explanation-4: -A change in technology causes the rightward shifts in the supply curve and there is no change in the demand curve. It represents a decrease in price and an increase in quantity because of an increase in the supply curve.
Detailed explanation-5: -Because the demand curve is generally downward sloping, a shift in the supply curve either upward or to the left will result in a higher equilibrium price and a lower equilibrium quantity.