After the price of music downloads falls, Phil buys fewer CDs and buys a new MP3 player. For Phil,

Question

Quizplus · Accepted Answer

The decrease in CD purchases and the purchase of an MP3 player implies that CDs and MP3 players are substitutes. Additionally, the decrease in CD purchases after the fall in music download prices suggests that music downloads and CDs are substitutes. At the same time, the purchase of an MP3 player after the fall in music download prices indicates that music downloads and MP3 players are complements, as the player is being used to download and listen to music. Therefore, the best choice is C, where music downloads and CDs are substitutes, and music downloads and MP3 players are complements.

After the Price of Music Downloads Falls, Phil Buys Fewer