Description
Assume in a simple example that two things occur simultaneously in an economy that produces “Good X”. The first thing is that the cost to produce “Good X” will decrease. The second thing will be an increase in consumer tastes and preferences for “Good X” in the economy. Assume that this is a competitive market, what will happen to the equilibrium price and quantity of “Good X”? Use supply and demand analysis to demonstrate your answer and be sure to provide the rationale behind what is happening and also discuss any interesting observations or outcomes. Finally, please cite an example from the news of a current event in real life that relates to each thing affecting “Good X” above, and be sure to explain why they relate. (Note: The magnitudes of any supply and/or demand shifts in this example are not specified; you may want to consider all possible scenarios).