Answer to Question #53369 in Macroeconomics for abhishek

Question

Suppose you are the manager of a chain of computer stores. For obvious reasons you have been closely following developments in the computer industry, you have just learned that the government has passed a two-prong program designed to further enhance the computer industry position in a global economy. The legislation provides increased funding for computer education in primary and secondary schools, as well as tax breaks for firms that develop computer software. As result of this legislation, what do you predict will happen to the equilibrium price and quantity of software? ( show graphically)

Answer 1

If the government has passed a two-prong program designed to further enhance the computer industry position in a global economy and the legislation provides increased funding for computer education in primary and secondary schools, as well as tax breaks for firms that develop computer software, then as result of this legislation the demand for computer software will increase, so the equilibrium price will rise and equilibrium quantity of software will rise too.