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 eliminates a quota that reduced the number of plasma TVs that can be imported into the United States, ceteris paribus, what would happen?

Question

Quizplus · Accepted Answer

With the elimination of the quota, the supply of plasma TVs would increase, leading to a decrease in price. As plasma TVs are complements to rented DVDs, an increase in demand for plasma TVs due to their decrease in price would result in an increase in demand for rented DVDs, leading to an increase in rental price. Additionally, since movies shown in theaters are normal goods and plasma TVs are complements to movies shown in theaters, the decrease in plasma TV prices would lead to an increase in demand for movies shown in theaters, which would lead to an increase in price. However, since the scenario does not provide information regarding the extent of these changes, it can be assumed that the overall effect would be a decrease in the price of plasma TVs and an increase in the rental price of DVDs.