ECO 201 HW 2 solution key

ECO 201 HW 2 solution key - 4. a. DVDs and TV screens are...

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4. a. DVDs and TV screens are likely to be complements because you cannot watch a  DVD without a television. DVDs and movie tickets are likely to be substitutes  because a movie can be watched at a theater or at home. TV screens and movie  tickets are likely to be substitutes for the same reason. b. The technological improvement would reduce the cost of producing a TV screen,  shifting the supply curve to the right. The demand curve would not be affected.  The result is that the equilibrium price will fall, while the equilibrium quantity will  rise. This is shown in Figure 16. Figure 16 c. The reduction in the price of TV screens would lead to an increase in the demand  for DVDs because TV screens and DVDs are complements. The effect of this  increase in the demand for DVDs is an increase in both the equilibrium price and  quantity, as shown in Figure 17.
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This note was uploaded on 09/15/2009 for the course ECON 201 taught by Professor Shoonlai during the Summer '09 term at Miami University.

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ECO 201 HW 2 solution key - 4. a. DVDs and TV screens are...

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