Consider the market for iPads. What happens if a fantastic new alternative tablet is developed by Samsung and, at the same time, a factory that makes iPads catches fire, destroying 3 million iPads?

Question

Quizplus · Accepted Answer

The introduction of a fantastic new alternative tablet by Samsung would increase supply in the tablet market, potentially lowering the price of tablets in general, including iPads. However, the destruction of 3 million iPads would decrease the supply of iPads, likely increasing their price. The simultaneous increase in demand for an alternative and the decrease in supply of iPads make the final effect on price indeterminate; however, the reduction in iPad supply suggests the price of iPads would increase. The quantity of iPads would be indeterminate because the decrease in supply suggests a lower quantity available, but the overall market dynamics, including potential shifts in demand due to the new alternative, make the final quantity outcome uncertain.

Consider the Market for IPads