Demand and SupplyLet's say that Qualcomm hiked the price of their Snapdragon chips suddenly. These chips are used for manufacturing most major smartphones in the market.What can you infer about the change in the equilibrium price and quantity of smartphones that use Snapdragon chips? (Assume ceteris paribus.)The price will increase and the quantity will increaseThe price will decrease and the quantity will increaseThe price will decrease and the quantity will decreaseThe price will increase and the quantity will decrease
Question
Demand and SupplyLet's say that Qualcomm hiked the price of their Snapdragon chips suddenly. These chips are used for manufacturing most major smartphones in the market.What can you infer about the change in the equilibrium price and quantity of smartphones that use Snapdragon chips? (Assume ceteris paribus.)The price will increase and the quantity will increaseThe price will decrease and the quantity will increaseThe price will decrease and the quantity will decreaseThe price will increase and the quantity will decrease
Solution
Based on the given scenario, if Qualcomm hikes the price of their Snapdragon chips suddenly, we can infer the following about the change in the equilibrium price and quantity of smartphones that use Snapdragon chips:
-
The price will increase: When the price of a key component like Snapdragon chips increases, it is likely that the cost of manufacturing smartphones will also increase. This increase in production costs will likely be passed on to the consumers, resulting in a higher price for smartphones that use Snapdragon chips.
-
The quantity will decrease: With an increase in the price of Snapdragon chips, smartphone manufacturers may find it less profitable to produce smartphones that use these chips. As a result, they may reduce the quantity of smartphones produced or opt for alternative chip options. This decrease in production will lead to a decrease in the quantity of smartphones that use Snapdragon chips.
Therefore, the correct answer is: The price will increase and the quantity will decrease.
Similar Questions
Because of increased competition, the price of cell phones dropped dramatically. According to the law of demand, what will happen to the quantity of cell phones demanded, given this price change?The quantity demanded will increase.The quantity demanded will decrease.The quantity demanded will either rise or fall, depending on other factors.The quantity demanded will be unaffected by this event.
Market EquilibriumSuppose both the supply and demand curves shift to the right. What would be the ultimate impact on the price of the product?The price will increase.The price will decrease.The price will remain the same.The price will depend on the magnitude of change in the demand and supply.
Effects of shifts in demand and supply on market equilibrium
effect on price and quantity when demand decreases and supply increases
Which of the following will most likely result in a price decrease AND sales decrease for smartphones?Aan increase in demand for smartphonesBa decrease in supply of smartphonesCa decrease in demand for smartphonesDan increase in supply of smartphones
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.