Hardware and software for computers are complements. Discuss the effects on the

Question

Hardware and software for computers are complements. Discuss the effects on the equilibrium price and quantity of:

A. Hardware, when new and more efficient manufacturing technology becomes available.
- What does this change affect? Demand or supply?
- In which direction does the curve shift?
- Draw a graph and explain what will happen to the price and quantity?

B. Software, when the price of computer hardware falls.
- What does this change affect? Demand or supply?
- In which direction does the curve shift?
- Draw a graph and explain what will happen to the price and quantity?

Explanation / Answer

A: demand, shifts downwards and the price will go down as the demand decreases B: demand, shifts upwards and the price will rise as the lack of availability of hardware

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