Identify which of the following would generate a decrease in the market demand for e-book readers, which are a normal good.
I. An increase in the price of downloadable apps utilized to enhance the e-book reading experience, which are complements.
II. An increase in the number of consumers in the market for e-book readers.
III. A decrease in the price of tablet devices, which are substitutes.
IV. A reduction in the income of consumers of e-book readers.
Part 2
A.
Both I and IV.
B.
Only IV.
C.
I, III and IV.
D.
Both III and IV.
The correct answer is D. Both III and IV.
c. is the answer
Apologies for the confusion. You are correct, the answer is C. I, III, and IV. Thank you for catching that mistake.
The correct answer is C. I, III, and IV.
Explanation:
I. An increase in the price of downloadable apps utilized to enhance the e-book reading experience, which are complements, would decrease the market demand for e-book readers. As the price of downloadable apps increases, the cost of using e-book readers increases, making them less attractive to consumers.
III. A decrease in the price of tablet devices, which are substitutes for e-book readers, would also decrease the market demand for e-book readers. Consumers might choose to purchase a cheaper tablet device that can also serve as an e-book reader instead of buying a dedicated e-book reader.
IV. A reduction in the income of consumers of e-book readers would also decrease the market demand for e-book readers. With less disposable income, consumers may prioritize spending on other essential goods and services, causing a decrease in the demand for e-book readers.
Therefore, options I, III, and IV would all generate a decrease in the market demand for e-book readers.