Answer to Question #87611 in Microeconomics for noor

Question

Q. 6) There are substitutes for the Kindle. Sony (Reader), Barnes & Noble (Nook), and others make e-book readers. Presumably these companies are also negotiating with textbook publishers. Each e-book reader uses its own format. When you buy an e-book for your Kindle, don’t expect to be able to read it on a Nook. Thus the e-books and the specific e-book reader are perfect complements.

But the serious competition is likely to come from an unexpected direction: tablet computers. Apple’s iPad has been a major success. The iPad includes iBooks, Apple’s version of an e-book reader.

Question: There is obviously competition in this market. What effect is increased competition likely to have on the price of books offered as e-books? What effect will that have on the price of paper books?

Answer 1

If there is obviously competition in this market, then the increased competition will likely decrease price of books offered as e-books, because the supply will increase, and the price of paper books will likely decrease too, because the demand for paper books will decrease.