The effect on the market for CD’s of technological improvement that lowers the cost of producing?

Question

draw supply and demand diagram to illustrate the effects on market price and quantity. [initial demand curve (d1), initial supply curve (s1) initial price (p1), initial quantity (q1), new demand curve (d2), new supply curve (s2), final price (p2), final quantity (q2) ]

Answer 1

A technological improvement will lower the cost of production for CD's. All other things equal, the supply of cd's should increase, since producers will be willing to make more of them since they are costing less to produce. This will shift the supply curve down or to the right, however you decide to describe it (typically it is to the right, but the case has been made for down). Demand will not change, as nothing to impact consumers desire for cd's has changed. This shift in supply will cause price to decline, but quantity to go up. The final price and quantity will be where the new supply curve meets the old demand curve. Hope this helps. Good luck in your future endeavors.