Improvements in technology usually result in an increase in the productivity of factors of production, resulting in a decrease in production costs. This causes in an increase in market supply . The price of recording tape decreases. Recording tapes and VCRs are complements. As a result, decreasing the price of tapes causes an increase in market demand for VCRs.
Movie theaters reduce their prices.
Movies and VCRs are substitutes. Reducing the price of movies thus causes a decrease in market demand for VCRs. Back to the ECO 289.24 Course Schedule .