Answer to Question #72440 in Other Economics for Cecilia Rincon
If an economy produces computers and pizzas and a technological innovation makes the production of computers cheaper, we would expect the economy's production of pizzas to:
-decrease by an amount equal to the increase in computers.
-stay the same.
There are many different answers to the above given question. As an economist I have chosen the following one: At first glance, one can choose the answer A. However I tend to think that the right answer should be C. Why? To answer to this additional question we should admit that above mentioned two products are totally different. For example, we can use computers many years, however we eat pizza almost every day, we do not use it for very long time as it can be spoiled. Secondly, these two products are not both complementary goods like batteries and TV remote and substitute goods such as the meat of different types of animals. What is more important in the above mentioned question nothing is said about pizza production. We confirm only that the present production of computers has become cheaper due to technological innovation impulses than it was last period of time. All these points show that the production of pizzas have no reason to rise or decrease, it should stay the same.