Question

Suppose that in 2011, 4 million plasma TVs were purchased at $950 each, while in 2012,...

Suppose that in 2011, 4 million plasma TVs were purchased at $950 each, while in 2012, 3 million plasma TVs were purchased at$800 each. What might have caused this change?

  1. The price of LCD TVs (a substitute for plasma TVs)fell.
  2. The price of LCD TVs(a substitute for plasma TVs) rose.
  3. Plasma TV manufacturing technology increased.
  4. Plasma TV manufacturing technology decrease
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Answer #1

Option a

The price of LCD TVs (a substitute for plasma TVs)fell.

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The price of substitute decreased means the demand for the good decreases and shifts to the left which decreases both quantity and price. In the given example the price and quantity both decreased.

If the substitute good price increases then both quantity and should increase for a plasma TV.

The technology change is on the supply and that effect in opposite direction for price and quantity. technology increases decrease price and increase the quantity and vice versa.

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