On September 3,2003,Universal Music Group announced plans to reduce the wholesale price of music CDs it distributes by an average of 25-30 percent.All else constant (i.e.,ignoring the effects of file-sharing programs),how would this change affect the retail market for new music CDs?

Question

Quizplus · Accepted Answer

The reduction in the wholesale price of CDs by Universal Music Group would reduce the cost of producing and distributing CDs, leading to a decrease in the wholesale price paid by retailers. This would shift the supply curve to the right, leading to an increase in equilibrium quantity and a decrease in equilibrium price. Therefore, the supply of CDs would increase, causing equilibrium price to decrease and equilibrium quantity to increase.

On September 3,2003,Universal Music Group Announced Plans to Reduce the Wholesale