Question

. If the price of CD Players go up, what would happen to the supply of
CD’s? Show and explain the effect of this on price and output of CD’s

Answer 1

Answer:

According to the principles of economics, price and supply are positively correlated. That is, price and supply usually move in the same direction.

The obverse is true for Demand and Price. All things being equal, demand would usually go in the opposite direction of price.

Explanation:  

In the question above, we have a scenario involving Joint Demand. Joint demand when the need or demand for a commodity arises as a result of the demand for another. Some examples are:

• Mobile phones and the internet (data bundles);
• Motor Vehicles and Engine Oil

The example in the question CD player and CDs is also a great example. Joint Demand is also referred to as Complementary Demand.

When there is a complementary relationship between two products, the rise or fall in the demand of one equals the rise or fall in the demand of the other.

When the price of CD players go up, the demand for it does down while its supply goes up. When the supply of CD players goes up, this will probably create a glut in the market because demand will go down.

When demand for CD players go down, it's complimentary demand -CDs will also experience a low output. In the long run, the prices for both will come down.

Cheers!