23. Suppose in the market for iPhones, the following two...

23. Suppose in the market for iPhones, the following two changes take place: (1) the cost of making iPhones falls and (2) the price of smart-phone data plans fall. What happens to the equilibrium price and the equilibrium quantity? A) The equilibrium price is indeterminate and the equilibrium quantity rises. B) The equilibrium price rises, but the equilibrium quantity is indeterminate. C) The equilibrium price and the equilibrium quantity rise. D) The equilibrium price falls, but the equilibrium quantity is indeterminate.

Transcript

00:01 Okay, so for this question, we have a couple of different questions about demand.

00:06 First question, basically just asks out of a list of options, for what reason would demand not rise for iphones? let's just go through all of the different options.

00:20 Number one, people are making more money.

00:22 I would say if people are making more money, then they would want to buy an iphone if they previously had not been able to.

00:27 So i would not say that that would not increase demand.

00:31 I would say that would increase demand.

00:34 Number two, the price of iphones goes down.

00:37 I'd say that's another thing that would make people want to buy iphones if they hadn't previously been able to.

00:42 Number three, price of comparable android phones goes down.

00:47 That would make people want to buy android phones, i would imagine.

00:52 If android phones are suddenly a lot cheaper than iphones, i think that people would want to buy android's more than iphones.

00:58 So i think that for the first one, the answer is going to be c, because that's going to make people want to buy android's, not iphones.

01:07 Just to double check, let's look through d as well.

01:10 D says the price of data plans goes down.

01:15 So, yeah, if you had not been able to use a data plan before and suddenly you're able to, you might want a new iphone to go with that data plan.

01:26 Those are complementary, i would say.

01:28 So i agree that i don't think that's the option.

01:31 I think the only thing that would not increase demand for iphones is c.

01:37 Second thing, they give us a demand function.

01:40 Qd, let me write this out really quick...

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