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19 July, 02:15

What is the most likely effect of the development of XBOX with DVD capabilities on the DVD player industry? a. decreased price elasticity of demand for the DVD player industry because XBOX are complements b. Increased price elasticity of demand for the DVD player industry because XBOX are substitutes c. Increased price elasticity of demand for the DVD player industry because XBOX are complements d. decreased price elasticity of demand for the DVD player industry because XBOX are substitutes

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  1. 19 July, 02:18
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    The correct answer is letter "B": Increased price elasticity of demand for the DVD player industry because XBOX are substitutes.

    Explanation:

    Price elasticity of demand reflects the changes in quantity demanded for a good or service as a result of changes in price. It is calculated by dividing the percentage change in quantity demanded by the percentage change in price. If the result is equal to or greater than one (1) the demand is elastic. It means a minimum change in price has a major impact on the quantity demanded volume.

    Thus, if XBOX implements DVD features, DVD players will face an increase in their price elasticity of demand because changing DVD players' prices could change their quantity demanded by far because consumers will prefer purchasing an XBOX which is a substitute.
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