Refer to Scenario 3.1 below to answer the questions that follow.
SCENARIO 3.1: Rented DVDs and movies shown in theaters are substitutes. Rented DVDs and plasma TVs are complements. Plasma TVs and movies shown in theaters are normal goods. People watch rented DVDs more often in the winter than in the summer.
-Refer to Scenario 3.1. If the number of stores renting DVDs increases by 10%, which of the following would occur?

Question

Quizplus · Accepted Answer

An increase in the number of stores renting DVDs would increase competition in the rental market, leading to a decrease in rental prices of DVDs. As rented DVDs and movie tickets are substitutes, the decrease in rental prices of DVDs would lead to a decrease in the price of movie tickets. Additionally, as rented DVDs and plasma TVs are complements, an increase in the number of stores renting DVDs is likely to increase demand for plasma TVs, leading to an increase in their prices. Therefore, the rental price of DVDs and the price of movie tickets would decrease, but the price of plasma TVs would increase.