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C. If Samsung lowers its price, what happens to the price and quantity of Iphones?

C. If Samsung lowers its price, what happens to the price and quantity of Iphones?

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Answer #1

I think the Samsung and the Apple are very much substitutes, the substitute goods have a positive cross elasticity of demand, that is when there is a fall in the price of one commodity the demand for the other commodity would decline and vice versa. In this scenario, Samsung has decreased their price so the demand for the I phones will decrease and their demand curve shifts to the left. The equilibrium price and quantity will fall.

Ans: Equilibrium price and quantity will decrease.

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