Refer to the above figure. Which diagram shows the effect on the market of cellphones when the demand for cellphones has increased?

Explain what effect each of the following events will have on the IS curve in a flexible exchange rate regime: (1 ) an increase in foreign output; (2 ) a reduction in the foreign interest rate; and (3 ) an increase in the domestic interest rate

What will be an ideal response?

Suppose that two things happen simultaneously that impact the equilibrium in the computer software market. First, technological innovation lowers the cost of producing computer software. Second, the price of computer hardware, a complement for computer software, declines. How would you expect these events to change the equilibrium in the computer software market?

a. The demand would decrease and supply would remain unchanged, resulting in a lower market equilibrium price and quantity. b. The supply would decrease and the demand would increase, resulting in a higher market equilibrium price and an indeterminate change in market equilibrium quantity. c. Both supply and demand would increase, resulting in an increase in equilibrium quantity and an indeterminate change in price. d. Both supply and demand would increase, resulting in a decrease in equilibrium quantity and a decrease in price.