A leading game console manufacturer reduces the price of its flagship product by 10 percent. Holding other things such as income and preferences constant, which of the following is the most likely group behavior prediction?

Question

Quizplus · Accepted Answer

The price reduction is expected to increase the quantity of game consoles demanded (demand curve shifts rightward) as the lower price makes the product more affordable for existing and potential customers. This assumes that other things, such as income and preferences, remain constant. The other options are less likely as there is no evidence to suggest that quality will be reduced or that there will be no impact on purchase patterns. Group behavior can be predicted for consumer goods, as long as the ceteris paribus assumption holds, which means that other things such as income and preferences are held constant.

A Leading Game Console Manufacturer Reduces the Price of Its