If producers of garden hoses have discovered new technology to improve production, while the number of gardeners increases, what happens in the market for garden hoses?

• A. Equilibrium price rises, equilibrium quantity ambiguous
• B. Equilibrium price falls, equilibrium quantity falls
• C. Equilibrium price ambiguous, equilibrium quantity rises
• D. Equilibrium price ambiguous, equilibrium quantity falls

Answer: (C)

Verified step by step guidance

1. Identify the factors affecting the supply and demand of garden hoses: The new technology improves production, which increases supply, and the increase in the number of gardeners increases demand.
2. Analyze the effect of increased supply: With improved technology, producers can supply more garden hoses at each price level, shifting the supply curve to the right.
3. Analyze the effect of increased demand: As the number of gardeners increases, the demand for garden hoses rises, shifting the demand curve to the right.
4. Determine the impact on equilibrium quantity: Both the supply and demand curves shift to the right, leading to an increase in the equilibrium quantity of garden hoses.
5. Assess the impact on equilibrium price: The rightward shift in both supply and demand makes the effect on equilibrium price ambiguous, as it depends on the relative magnitudes of the shifts in supply and demand.