Music compact discs are normal goods.What will happen to the equilibrium price and quantity of music compact discs if musicians accept lower royalties,compact disc players become cheaper,more firms start producing music compact discs,and music lovers experience an increase in income?

Question

Quizplus · Accepted Answer

The decrease in royalties for musicians and the decrease in the cost of production due to more firms entering the market will lead to a decrease in the cost of making music compact discs. This will cause the supply curve to shift to the right, causing an increase in quantity and a decrease in price. Additionally, the increase in income for music lovers will lead to an increase in demand for music compact discs, causing another shift in demand to the right. This will cause a further increase in quantity and an increase in price. The effect on price is ambiguous, but the effect on quantity will definitely rise. Therefore, the best answer is D.

Music Compact Discs Are Normal Goods