Which of the following should decrease the demand for portable music players in a competitive market? 1.The development of improved, low-priced devices that compete with music players. 2. An...
Which of the following should decrease the demand for portable music players in a competitive market?
1.The development of improved, low-priced devices that compete with music players.
2. An increase in population and incomes.
3. A substantial increase in the number and quality of music for players.
4. Consumer expectations of substantial price increases in music players.
Of the options offered in this question, only #1 will decrease the demand for portable music players. All of the other three options would actually increase demand for players. (Of course, this assumes that all other factors are kept equal in each case.)
If there are more people and/or they have more money, demand for normal goods rises. More buyers means more sales when the rate of sales per buyer is steady. More income means more ability to buy.
If the amount and quality of music available for these players improves, people will want to buy more of the players. The players will be more useful to them now that there is more to be played on them.
If people expect that the price will rise in the future, they will buy more players today. This is so they can avoid paying more for the player in the future.
By contrast, an increase in competing devices will decrease demand. If consumers have more choices of things to buy instead of portable music players, some of them will buy those other things. In this case, demand for the music players will fall.