PlayStations and PlayStation games are complementary goods.A technological advance in the production of PlayStations will
A)increase consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games.
B)increase consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games.
C)decrease consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games.
D)decrease consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games.

Question

Quizplus · Accepted Answer

The technological advance in the production of PlayStations will increase the supply of PlayStations, which will lead to a decrease in the price of PlayStations. This decrease in price will increase consumer surplus in the market for PlayStations. Moreover, the increase in the quantity demanded of PlayStations will also increase the demand for PlayStation games. As a result, the increase in demand will increase the price of PlayStation games, leading to an increase in producer surplus in the market for PlayStation games. Therefore, both consumer and producer surplus will increase in their respective markets, making choice B the correct answer.

PlayStations and PlayStation Games Are Complementary Goods