Question

$$ \text { If the price of cameras falls, there will be a(n) } $$ __________a) decrease in the demand for film b) decrease in the quantity of cameras demanded c) decrease in the supply of cameras d) increase in the demand for cameras e) increase in the quantity of cameras demanded

Short answer

The most likely result of a decrease in the price of cameras is an increase in the quantity of cameras demanded (option e). This is based on the law of demand, which states that, other things being equal, the quantity demanded of a good rises when the price of the good falls.

Step-by-step solution

Understanding the relationship between price and demand

According to the law of demand in economics, when the price of a product decreases, the quantity demanded for that product increases, all else remaining constant. This occurs because as cost lowers, more consumers can afford to purchase the product, resulting in increased demand.

Identifying complementary goods

If we consider film to be a complementary good to cameras (which is logical, as one needs a camera to use the film), we can apply the theory of complementary goods to this scenario. When the price of one good (cameras) decreases, the demand for its complementary good (film) should increase. This is because as more people buy cameras due to their lower price, more people will also need to buy film to use with their new cameras.

Evaluating the statements

With the understanding gained from the above discussion, let's evaluate the given options: a) A decrease in the demand for film - This is not likely, as we established in Step 2 that demand for film should increase as a result of a decrease in camera prices. b) A decrease in the quantity of cameras demanded - This contradicts the law of demand, which states that a decrease in price leads to an increase in quantity demanded. c) A decrease in the supply of cameras - The decrease in camera prices is not necessarily linked to a decrease in supply, it may rather indicate higher supply or lower demand. d) An increase in the demand for cameras - Decreasing price doesn't usually increase demand, it increases quantity demanded which is different from demand. e) An increase in the quantity of cameras demanded - This statement is consistent with the law of demand.

Conclusion

The most likely result of a decrease in the price of cameras is an increase in the quantity of cameras demanded (option e). This is based on the law of demand, which states that, other things being equal, the quantity demanded of a good rises when the price of the good falls.

Key concepts

Complementary Goods

Complementary goods are items that are used together, such that the demand for one is positively related to the demand for the other. In simpler terms, if you need one product to use another, those two products are complements. Cameras and film are classic examples of complementary goods. When people buy more cameras, they also need more film.

The principle behind complementary goods is based on the idea that the usage of one good enhances the need for the other. If the price of cameras drops, making them more affordable, more people are likely to purchase cameras. As a result, the demand for film increases because film is necessary to use with cameras. This relationship effectively ties the two goods together, so changes in the market conditions for one affect the other.

Understanding complementary goods helps in predicting how changes in the market can have wider impacts beyond just the product experiencing the price change. This is why recognizing these relationships is an essential aspect of examining market dynamics.

Quantity Demanded

The term "quantity demanded" refers to the specific amount of a product that consumers are willing and able to purchase at a given price. This concept is central to the law of demand, which states that as the price of a good falls, the quantity demanded typically rises, provided other factors are constant.

For instance, if camera prices decrease, more people will buy cameras, leading to an increase in the quantity demanded for cameras. It's important to differentiate between the concepts of "demand" and "quantity demanded." Demand refers to the whole demand curve that shows the relationship between price and quantity demanded over a range of prices, whereas quantity demanded refers to a single point on this curve.

When analyzing market phenomena, it's crucial to pinpoint changes in quantity demanded specifically due to price changes. This helps economists and businesses assess how different pricing strategies may influence consumer buying behavior and overall market demand.

Economics Principles

Economics is founded on several principles that explain how markets function and how consumers and producers interact. At the heart of these principles are concepts like the law of demand and supply, utility, and market equilibrium.

The law of demand, a fundamental principle within economics, highlights the inverse relationship between price and quantity demanded— when prices go down, the quantity demanded goes up, and vice versa. This principle allows businesses and economists to predict changes in consumer behavior in response to price changes.

Additionally, understanding supply and demand principles is crucial for identifying how changes in factors like consumer preferences, resource availability, and technology affect market equilibrium. Using these principles, businesses can better tailor their strategies to meet customer needs and optimize their operations.

By employing these economics principles, stakeholders can make well-informed decisions that align with market dynamics and consumer trends, ultimately leading to more efficient markets and satisfied consumers.