Directions: The question is based on the demand and supply diagram as shown in figure. S1 and D1 are….

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Directions: The question is based on the demand and supply diagram as shown in figure. S₁ and D₁ are the original supply and demand curves, respectively. D₂, D₃, S₂ and S₃ are the possible new demand and supply curves.

We are analysing the market for Good Z. The price of a complement good, Good Y, declines. At the same time, there is a technological advance in the production of Good Z. What point, starting from initial equilibrium point (1), in the figure is most likely to be the new equilibrium price and quantity?

Options :-

1. Point 4
2. Point 5
3. Point 7
4. Point 8

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Answer/ Explanation

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