Answer to Question #297120 in Microeconomics for Malik

Question

Consider the markets for film streaming services,

TV screens, and tickets at movie theaters.

a. For each pair, identify whether they are

complements or substitutes:

r
Film streaming and TV screens

r
Film streaming and movie tickets

r
TV screens and movie tickets

b. Suppose a technological advance reduces the cost

of manufacturing TV screens. Draw a diagram to

show what happens in the market for TV screens.

c. Draw two more diagrams to show how the

change in the market for TV screens affects the

markets for film streaming and movie tickets.

Answer 1

i) Compliments

ii) Substitutes

iii) Substitutes

b) Effect of technological advancement that reduces cost. This causes more production of TV screens and hence a shift in the supply curve outwards as shown below. The shift reduces the price of the TV screens.

Effect on film streaming

Since TV screens and film streaming are compliments, an increase in supply of TV screens also cause an increase supply of film streaming as shown below.

Effect on movie tickets

Since TV screens and movie tickets are substitutes, an reduction in price of TV screens causes consumers demand more of TV screens and hence a reduced demand for movie tickets as shown below