Factories that produce smartphones can also produce smart watches. Which of the
ID: 1136471 • Letter: F
Question
Factories that produce smartphones can also produce smart watches. Which of the following events in the market for smartphones illustrates the law of supply?
1. The price of a smart watch falls.
2. A new robot technology lowers the cost of producing smartphones.
3. The price of a smartphone falls.
4. The price of a smartphone is expected to rise next year.
5. The wage rate paid to smartphone factory workers increases.
A.
Event #1 only
B.
All 5 events listed
C.
Events #2, #3, and #4
D.
Event #3 only
E.
Events #1, #4, and #5
(It is NOT C.)
Explanation / Answer
Answer.) E.) Event #1 , #4 and #5
Since smartphone companies can also produce smartwatches therefore this will increase supply of smartwatches in the market hence price of smartwatch is going to reduce. Smartphone firms dependency on smartphones for revenue generation will also reduce. Thus, new innovations can be supported in smartphone market . Also, since a smartphone worker can also be used to make a smartwatch therefore this will add to its bargaining power and hence will increase its wage rate.
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