For each of the following shifts(A,B,C,&D) in the demand curve and associated pr
ID: 1217663 • Letter: F
Question
For each of the following shifts(A,B,C,&D) in the demand curve and associated price change of a complement or substitute item, explain whether the change in the price of the complement or substitute must have been an increase or a decrease. A. A rise in the demand for a dashboard global-positioning-system device follows a change in the price of automobiles, which are complements. B. A fall in the demand for e-book readers follows a change in the price of e-books, which are complements. C. A rise in the demand for tablet devices follows a change in the price of ultrathin laptop computers, which are substitutes. D. A fall in the demand for physical books follows a change in the price of e-books, which are substitutes.
Explanation / Answer
A. A rise in the demand of a complementary good happens due to fall in price of complementary good as one good cannot be consumed withouth another . So the price of Automobiles decreases.
B. A fall in the demand of complementary good happens due to rise in price of the other complemantary good as one cannot be consumed without another, so the price of e-book increases.
C. A rise in the demand of substitute good means that the price of the other substitute good has been increased, as we can use tablet devices rather than ultrathin laptops. This means that the price of laptops has increased so consumers are moving towards tablet devises.
D. A fall in the demand of physical goods shows that price of e-books has fallen. As they are substitues we can use either of them.
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