Using a change in supply and/or demand, explain the following phenomena:
a. All else constant, gasoline prices are higher in summer than winter months.
b. At the same time that the quality of personal computers has been increasing, the price of personal computers has been falling.
ANSWER
a. Demand for travel is higher in summer than winter months, which causes the demand for gasoline to be higher as well.
b. Supply (and quality) have increased as a result of technology improvements, while demand has not increased as rapidly, putting downward pressure on price.
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