The price of DVD recorders is likely to fall rapidly over the next few years.  How will this affect the market for video cassette recorders?

Expert Answers

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DVD recorders and VCRs can be seen as substitute goods for one another.  Therefore, a drop in the price of DVD recorders will (all other things being equal) cause demand for VCRs to drop.  This will lead to a decline the price of VCRs and in the quantity of them that is sold.

When the price of one good (DVD recorders) falls, the demand for substitutes (VCRs) goes down.  This is because people will buy the new, cheaper DVD recorders instead of VCRs.  When demand for a product goes down, its price goes down and fewer of that product are sold.

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