Homework: HW 4

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Question 3, Text Problem 4-3
HW Score: 15.38%, 2 of 13 points
Points: 0 of 1
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Part 1
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?
Part 2
A.
Demand increases and supply decreases
.
B.
Demand increases and supply increases.
C.
Demand decreases and supply increases
.
D.
Demand decreases and supply decreases.

Answer 1

Part 1: In order for there to be an unambiguous increase in the market clearing price of GPS devices but no change in the equilibrium quantity, the following changes could have occurred:

A. Demand increases and supply decreases: This means that there is a greater demand for GPS devices, but at the same time, the supply of GPS devices has decreased. The increase in demand outweighs the decrease in supply, leading to an increase in the market clearing price. However, due to the decrease in supply, the equilibrium quantity remains the same.

Part 2: Based on these options, the correct answer would be:

A. Demand increases and supply decreases.