Question

Show necessary and appropriate steps please. Consider the markets for DVD movies, TV screens, and tickets at movie theaters.

1.For each pair, identify whether they are complements or substitutes:

a.DVDs and TV screens

b.DVDs and movie tickets

c.TV screens and movie tickets

2.Suppose a technological advance reduces the cost of manufacturing TV screens. Draw a diagram and explain what happens in the market for TV screens.

3.Draw two more diagrams to show how the change in the market for TV screens affects the markets for DVDs and movie tickets. Explain your answers briefly.

a.The market for DVDs

b.The market for movie tickets

Answer 1

Q1.

a: DVD and TV screen are complements as to view the output of DVD, a TV screen is essentially required.

b: DVD and movie tickets are substitute goods. This is because DVD are generally used to view movies at home by using TV as visual screens. Another alternative to view movies in the theatre.

c: TV screens and movie tickets substitutes. The reason being, one can watch movie in TV rather going to the theatre. Hence as number of TV screens is rising thus it is anticipated that sale of movie tickets will fall.