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Chapter 4: Q. 4.3 (page 92)

There are simultaneous changes in the demand for and supply of global-positioning system (GPS) devices, with the consequences being an unambiguous increase in the market clearing price of these devices but no change in the equilibrium quantity. What changes in the demand for and supply of GPS devices could have generated these outcomes? Explain.

Short Answer

Expert verified

Increased demand and reduced supply, in the same proportion.

Step by step solution

01

Given information

Increased market clearing price and no change in quantity.

Demand is the amount of goods required or asked by the people in that economy.

Supply is the amount of goods given or available in an economy.

02

Step2. Explanation

Since, the market price has increased, and there is no change in quantity, this is a result of increased demand and reduced supply, both in the same proportion so that the equilibrium quantity remains constant.

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