Explain technological innovation that lowers the cost

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Reference no: EM13177812

Find the flaws in reasoning in the following statements, paying particular attention to the distinction between shifts of and movements along the supply and demand curves. Draw a diagram to illustrate what actually happens in each situation.

a. A technological innovation that lowers the cost of producing a good might seem at first to result in a reduction in the price of the good consumers. But a fll in price will increase demand for the good and higher demand will send the price up again. It is not certain, therefore, that an innovation will really reduce price in the end.

b. A study shows that eating a clove of garlic a day can help prevent heart disease, causing many consumers to demand more garlic. this increase in demand results in a rise in the price of garlic. Consumers, seeing that the price of garlic has gone up, reduce their demand for garlic. This causes the demand for garlic to decrease and the price of garlic to fall. Therefore, the ultimate effect of the study on the price of garlic is uncertain.

Reference no: EM13177812

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