Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 3: Problem 18

A Dell computer is a substitute for an HP" computer. What happens to the demand for HP computers and the quantity demanded of Dell computers as the price of a Dell falls (as a result of a change in supply)?

Short Answer

Expert verified
As the price of Dell computers decreases, the quantity demanded of Dell computers increases while the demand for HP computers decreases.

Step by step solution

01

Understand the concept of 'substitute goods'

If two goods are substitutes, it means that they can be used in place of one another. Here, Dell and HP computers serve the same function and thus, are substitutes.
02

Initial impact of decrease in price of a substitute good

As the price of Dell computers decreases, they become more attractive to consumers. This causes a movement along the demand curve of Dell computers to a higher quantity demanded.
03

Impact on the demand for other good

As more consumers opt for cheaper Dell computers, the demand for the more expensive alternative, HP computers, will decrease. This causes a shift in the entire demand curve of HP computers to the left, indicating a decrease in demand at every price.
04

Resulting changes

The decrease in the price of Dell computers leads to an increase in their quantity demanded and a decrease in demand for HP computers.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

On most days, more people want to see the taping of The Tonight Show Starring Jimmy Fallon (in New York City) than there are seats in the taping studio. What might explain this shortage?

With respect to each of the following changes, identify whether the demand curve will shift rightward or leftward: a. An increase in income (the good under consideration is a normal good) b. A rise in the price of a substitute good (caused by a decline in supply) c. A rise in expected future price d. A fall in the number of buyers

How might the price of corn affect the supply of wheat?

The price of good \(X\) is higher in year 2 than in year 1 and people are buying more of good \(X\) in year 2 than year 1 . Obviously, the law of demand does not hold. Do you agree or disagree? Explain your answer.

"The price of T-shirts keeps rising and rising, and people keep buying more and more. T-shirts must have an upwardsloping demand curve." Identify the error.
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free