If the demand for movies increases at the same time as the movie industry adopts labor-saving technology for producing movies, the equilibrium price for movies will increase, but the effect on the equilibrium quantity of movies is ambiguous.

Question

Quizplus · Accepted Answer

The adoption of labor-saving technology, which typically reduces production costs, could increase the supply of movies. If demand also increases, the equilibrium quantity of movies will definitely increase. The effect on price is ambiguous because the increase in demand tends to increase price, while the increase in supply tends to decrease price.

If the Demand for Movies Increases at the Same Time