Chapter 3, Problem 1TC

To determine

The technological change.

Explanation of Solution

Technological change will reduce the production costs for smart shirts shifting its supply curve to the right showing the increase in supply but the demand curve remains the same. The increasing supply leads to reduce the price and that in turn increases the quantity demand for smart shirts. Thus, there is a movement along the existing demand curve because smart shirts and smart watches are complements, and a lower price for smart shirts will equally increase the demand for smart watches. The demand curve for smart watches will shift to the right, resulting in an increase in the equilibrium quantity and an increase in the equilibrium price.

Economics Concept Introduction

Concept introduction:

Technological change: They are the changes in the new and better ways for producing goods and services and distributing the same which will make the production more efficient.