Apple, the Consumer Electronics Giant, on Tuesday Rolled Out New

question 123

Multiple Choice

Apple, the consumer electronics giant, on Tuesday rolled out new versions of its popular iPad tablet. Suppose when the price of an iPad decreases by 20 percent, the number of songs downloaded on iTunes increases by 30 percent. Based on this information iTunes are

• A) a normal good.
• B) an inferior good.
• C) substitutes for iPads.
• D) complements to iPads.

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Definitions:

Fixed Costs

Fixed costs are business expenses that remain unchanged regardless of the level of production or sales, such as rent, salaries, and insurance premiums.

Capital

Resources made and used by humans to produce goods and services, including buildings, machinery, and equipment.

Barriers to Entry

Obstacles that prevent new competitors from easily entering an industry or area of business.

Industry Structure

The characteristics that influence the nature of competition and pricing in a particular industry, including the number and size of firms, entry barriers, and product differentiation.