Refer to Scenario 3.1 below to answer the questions that follow.
SCENARIO 3.1: Rented DVDs and movies shown in theaters are substitutes. Rented DVDs and plasma TVs are complements. Plasma TVs and movies shown in theaters are normal goods. People watch rented DVDs more often in the winter than in the summer.
-Refer to Scenario 3.1. Most plasma TVs sold in the United States are imported from Japan. If the United States government reduces the number of plasma TVs that can be imported into the United States, ceteris paribus, what would happen?

Question

Quizplus · Accepted Answer

Since plasma TVs and rented DVDs are complements, a decrease in the number of imported plasma TVs will decrease the demand for rented DVDs. As a result, the rental price of DVDs will decrease. Additionally, since plasma TVs are normal goods, a decrease in their supply (due to the reduction in imports) will lead to an increase in their price. Therefore, the price of plasma TVs would increase, and the rental price of DVDs would decrease.