There is a new gadget that just came out. Many people want it, but there are not many available. After one year, the gadget is more popular, but there are more of them available. A student describes how the price of the gadget would change using the laws of supply and demand by saying, "Since the quantity supplied is initially low, the price will be high and, as the quantity supplied increases, the price would get lower." Why is the student's answer incorrect?

Question

Justice Walter

English

4 November, 02:37

There is a new gadget that just came out. Many people want it, but there are not many available. After one year, the gadget is more popular, but there are more of them available. A student describes how the price of the gadget would change using the laws of supply and demand by saying, "Since the quantity supplied is initially low, the price will be high and, as the quantity supplied increases, the price would get lower." Why is the student's answer incorrect?

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Answers (1)

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Elliott Lynch · Answer 1

"Since the quantity supplied is initially low, the price will be high and, as the quantity supplied increases, the price would get lower."

The student's answer is incorrect because he did not put into consideration the demand of the product.

The law of supply and demand states that if a product has low supply and high demand then the price is high. But if the product has high supply and low demand then the price will be low.

If the supply is high and the demand is high, then the price will remain the same.