Question

Music compact discs (CDs) are normal goods. What will happen to the equilibrium price and quantity of music compact discs if musicians accept lower royalties, compact disc players become cheaper, more firms start producing music compact discs, and music lovers experience an increase in income? Price will fall, and the effect on quantity is ambiguous. Price will rise, and the effect on quantity is ambiguous. Quantity will fall, and the effect on price is ambiguous. Quantity will rise, and the effect on price is ambiguous.

Answer 1

Answer:

Quantity will rise, and effect on price is ambiguous

Explanation:

The above question shows several factors that will strongly influence the music CDS industry. The question shows a situation where musicians began to accept lower royalties, CD players became cheaper, more companies started producing music records and music lovers suffered an increase in income. With these factors, we can say that both the supply and demand of the music CDS will increase, so we can say that the quantity (both supply and demand) will increase, but we cannot say what will happen with the price, for this we can say that the effect of these factors on price is ambiguous .