If the technology for producign a good improves and at the same time,the price of a substitute good falls, then the quantity bought and sold of the first good will increase. True, False, or Uncertain. Explain.
Take a shot.
Hint: draw existing supply and demand curves. Then shift the curves according to the environment changes.
To determine whether the quantity bought and sold of the first good will increase when the technology for producing it improves and the price of a substitute good falls, we need to analyze the situation using supply and demand curves.
First, let's understand how improvements in technology affect the supply curve. When the technology for producing a good improves, it usually leads to increased efficiency and lower production costs. This means suppliers can produce the same quantity of goods at a lower cost or produce more goods for the same cost. As a result, the supply curve shifts to the right, indicating that more of the good can be supplied at each price level.
Now let's consider the effect of a fall in the price of a substitute good on the demand curve. A substitute good is a product that can be used in place of another. If the price of a substitute good falls, consumers may switch from buying the first good to the cheaper substitute. This decrease in demand for the first good would cause the demand curve for the first good to shift to the left, indicating a decrease in quantity demanded at each price level.
When we combine these effects, the impact on the quantity bought and sold of the first good depends on the relative magnitude of the shifts in the supply and demand curves. If the shift in the supply curve caused by the technology improvement is greater than the shift in the demand curve resulting from the fall in the price of the substitute good, then the quantity bought and sold of the first good will increase.
However, if the shift in the demand curve caused by the price decrease of the substitute good is greater than the shift in the supply curve due to the technology improvement, then the quantity bought and sold of the first good will decrease.
Therefore, we cannot make a definitive conclusion without more information about the magnitudes of these shifts. It is uncertain whether the quantity bought and sold of the first good will increase, decrease, or remain the same when the technology for producing it improves and the price of a substitute good falls.