Question

If a new breakthrough in manufacturing technology, reduces the cost of producing Blu-ray players by half,...

If a new breakthrough in manufacturing technology, reduces the cost of producing Blu-ray players by half, what will happen to each of the following?

               a. supply of Blu-ray players

               b. demand for Blu-ray players

               c. equilibrium price and quantity of Blu-ray player

               d. demand for Blu-rays

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Answer #1

a) Supply of Blu-ray players will increase. The supply curve of Blu-ray players will shift rightward. Because now cost of production decreases.

b) Demand for Blu-ray players will remain same. The demand curve will remain the same. Because cost of production doesn't have any impact on demand.

c) Equilibrium price will decrease and quantity will increase. Because when supply curve shifts rightward and demand curve remains the same, the new equilibrium occurs at lower price and higher quantity.

d) Demand for Blu-ray will increase because the equilibrium quantity increased. Because Blu-ray player and Blu-rays are complementary goods.

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