"The Price of Digital Cameras Fell Because of Improvements in Production

question 196

Multiple Choice

"The price of digital cameras fell because of improvements in production technology.As a result, the demand for film cameras decreased.This caused the price of film cameras to fall; as the price of film cameras fell, the demand for film cameras decreased even further." Evaluate this statement.

• A)The statement is false because the demand for film cameras would increase as the price of digital cameras fell.
• B)The statement is false.A decrease in the price of digital cameras would decrease the demand for film cameras, but a decrease in the price of film cameras would not cause the demand for film cameras to decrease.
• C)The statement is false because it confuses the law of demand with the law of supply.
• D)The statement is false because digital camera producers would not reduce their prices as a result of improvements in technology; doing so would reduce their profits.

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Definitions:

Subsidize

To support an organization, activity, or economic sector by providing financial assistance, often from the government to keep prices low or to ensure it continues to operate.

Fiscal Policy

Government strategies related to taxation and public spending, used to influence the economy and fund public services.

Taxing and Spending

The government's practice of collecting revenues through taxes and deciding on the allocation of these funds for various public expenditures.

Board of Governors

The leading body or executive committee that governs the activities of an organization, such as a central bank or regulatory authority.