Consider the market for new DVDs. If DVD players became cheaper, buyers expected DVD prices to fall next year, used DVDs became more expensive, and DVD production technology improved, then what could we safely conclude would happen to the equilibrium price of a new DVD?

Question

Quizplus · Accepted Answer

The equilibrium price is affected by both demand and supply changes. Cheaper DVD players and more expensive used DVDs increase demand, while expected future price drops decrease demand. Improved production technology increases supply. These opposing effects make it uncertain what will happen to the equilibrium price.

Consider the Market for New DVDs