A theory asserts that manufacturers are less willing to sell units of output as the price of a good decreases, ceteris paribus. However, as the price of computers fell throughout the 1990s, more computers were sold. Which of the following best explains the apparent conflict between theory and data?
A)The theory must be invalid.
B)The theory rests on assumptions that are too simplistic.
C)It is likely that variables other than the price and quantity of computers sold were changing.
D)All variables other than the price and quantity of computers sold were unchanged.

Question

A theory asserts that manufacturers are less willing to sell units of output as the price of a good decreases, ceteris paribus. However, as the price of computers fell throughout the 1990s, more computers were sold. Which of the following best explains the apparent conflict between theory and data?
A)​The theory must be invalid.
B)​The theory rests on assumptions that are too simplistic.
C)​It is likely that variables other than the price and quantity of computers sold were changing.
D)​All variables other than the price and quantity of computers sold were unchanged.

Quizplus · Accepted Answer

It is likely that other variables, such as advancements in computer technology and an increase in consumer demand for computers, were changing and had a greater impact on the quantity of computers sold than the decrease in price. Therefore, the theory of manufacturers being less willing to sell units of output as the price decreases may still hold true, but other factors must be considered in analyzing the market for computers.

A Theory Asserts That Manufacturers Are Less Willing to Sell