Question

The price of compact fluorescent light bulbs fell because of improvements in production technology. As a result, the demand for incandescent light bulbs decreased. This caused the price of incandescent light bulbs to fall; as the price of incandescent light bulbs fell the demand for incandescent light bulbs decreased even further." Evaluate this statement.

Answer 1

Answer:

This statement if FALSE

Step-by-step explanation:

This question deals with the concept of competing products and how the price of a product effects its demand

There are two competing bulbs

a) Compact fluorescent light bulbs

b) Incandescent light bulbs

The first statement exclaims that the price of the product (a) decreases and this causes the demand of product (a) to increase, this would decrease the demand of product (b) as they are competitors.

To retaliate against the loss of sales of product (b) the price of product (b) is decreased, this should increase the demand of product (b) but the statement says the the demand of product (b) further decreases.

Since we know from the statement that sales were primarily driven by the price of the products, the demand of product (b) should have increased. Hence this statement is false