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Question 1 Consider the markets for 4K discs, 4K TV screens, tickets at movie theaters. (a) Identity whether the following pa

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Answer #1

Question 1

a. i. 4K discs and 4K TV screens are complements of each other as 4K disc will be played with the help of 4K TV screens and vice versa.

ii. 4K discs and movie tickets are substitutes of each other as when price of 4K discs increases, people substitute 4K discs with movie screens and vice versa.

b. As the technological advance reduces the cost of manufacturing 4K TV screens, hence this will increase the supply of 4K TV screens and the supply curve for 4K TV screens will shift rightward from S1 to S2 and as the economy moves from point A to point B, the equilibrium price of 4K TV screens decline from P1 to P2 and the equilibrium quantiy of 4K TV screens will increase from Q1 to Q2.

a puce si S2 P B ou Denad Quarkity Q1 Q2 CS Scanned with CamScanner

c. Now as 4K TV screens and 4K discs are substitutes of each other, the decline in the price of 4K TV screens will increase the demand for 4K discs as people will buy more 4K discs to be used with 4K TV screens and as a result, the demand curve for 4K discs will shift rightward from D1 to D2 and as the economy moves from point A to point B, the equilibrium price of 4K discs increases from P1 to P2 and the equilibrium quantiy of 4K discs will increase from Q1 to Q2. (panel1)

panel 1 A price hyddis pra Pi on od DI * Quantity Q1 Q2 CS Scanned with CamScanner

Now as 4K TV screens and movie tickets are substitutes of each other, a decline in the price of 4K TV screen will lower the demand for movie tickets as people will substitute movie tickets with 4K discs and hence the demand curve for movie tickets will shift leftward from D1 to D2 and as the economy moves from point A to point B, the equilibrium price of movie tickets decline from P1 to P2 and the equilibrium quantity of movie tickets will decline from Q1 to Q2.(Panel 2)

Panel 2 aprice Supply A Pi v P2 D B r Dz Q) Q2€ Quantity CS Scanned with CamScanner

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