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JAMB Economics 1990 Question 13

Question 13

Price Determination

Technical progress that leads to reduction in costs results in

  1. A.an increase in equilibrium price and quantity
  2. B.a decrease in equilibrium price and quantity
  3. C.an increase in equilibrium price and decrease in equilibrium quantity
  4. D.a decrease in equilibrium price and increase in equilibrium quantity
Show the answer and explanation

Answer: D (a decrease in equilibrium price and increase in equilibrium quantity)

Explanation

Lower costs shift the supply curve to the right; with demand unchanged, price falls and quantity rises.