Question

Question 2 (10 points) Other things remain equal, which of the following factors causes the market supply curve of Blue-ray players to shift leftwards? The costs of producing a single Blue-ray player increases. The number of firms selling Blue-ray players increases. The sellers are expecting the price of Blue-ray players to decline in the soon future Non of the above factors causes the market supply curve of Blue-ray players to shift leftwards.

Answer 1

Answers

• Answer #2

--Supply curve tends to shift leftwards when factors affecting supply (other than “price of the product”) change in unfavourable way, leading to a DECREASE in supply.

--Hence, correct answer is Option #1: If Cost of producing a single blue ray player increases, its supply will decrease, and the curve will shift leftwards.

--The Option #2 and #3 will lead a a ‘rightward’ shift in supply curve.

• Answer #3

--The relation between two product and their behaviour to each other’s price can be summarised below:
>If they are substitute goods, a decrease in price of one product will lead to decrease in demand for other related good, and vice versa.
>If they are complementary goods, a decrease in price of one product, will increase the demand for the product as well as the demad of its complementary goods.

--Here, Blue Ray movies and Blue ray players are complementary goods.
--Decrease in prices of Blue ray movies will:
>Increase demand for Blue ray movies [Option #1],
>Increase demand for Blue ray players (Option #2) [because it’s a complimentary good for Blue ray movies], and
>Decrease in demand for DVD players (Option #3) [as this is a substitute product]

--Hence, correct answer is Option #4: All of the above are expected to occur if Blue ray movies become significantly cheaper.