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As the price of DVD players has fallen over the last two years, more DVD players have...

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yaga49 | (Level 1) Valedictorian

Posted April 20, 2013 at 11:22 AM via web

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As the price of DVD players has fallen over the last two years, more DVD players have been sold by consumer electronics firms.  Is this a violation of the law of supply?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted April 20, 2013 at 1:52 PM (Answer #1)

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No, this is not a violation of the law of supply.  A decrease in the sale price of an item like a DVD player is supposed to lead to a drop in the number of them that is supplied.   However, that is only if all other things remain equal.  If other factors change, this relationship can be altered.

In this case, what has to have happened is that supply, and not just the quantity supplied, has increased.  That is, firms have become willing to sell more DVD players at any given price.   The most likely reason for this is that the price of making the DVD players has gone down as well.  A major determinant of supply is the cost of inputs.  Over time, the cost of inputs for DVD players has gone down.  This has meant that producers can drop the prices that they are charging while, at the same time, being able to make as much profit or more. 

When the price of making a good or service goes down, supply increases.  When supply increases, prices drop.  That is what is going on in this scenario.  It does not violate the laws of supply.

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