"The price of compact LED lights fell because of improvements in production technology.As a result, the demand for incandescent light bulbs decreased.This caused the price of incandescent light bulbs to fall; as the price of incandescent light bulbs fell the demand for incandescent light bulbs decreased even further." Evaluate this statement.
A)The statement is false.A decrease in the price of compact LED lights would decrease the demand for incandescent light bulbs, but a decrease in the price of incandescent light bulbs would not cause the demand for incandescent light bulbs to decrease.
B)The statement is false because the demand for incandescent light bulbs would increase as the price of compact LED lights fell.
C)The statement is false because compact LED lights producers would not reduce their prices as a result of improvements in technology; doing so would reduce their profits.
D)The statement is false because it confuses the law of demand with the law of supply.

Question

Quizplus · Accepted Answer

The statement incorrectly suggests that a decrease in the price of incandescent light bulbs would lead to a decrease in demand for them. In reality, a decrease in price typically leads to an increase in quantity demanded, not a decrease in demand itself. Demand refers to the willingness and ability of consumers to purchase goods at different prices, while quantity demanded refers to the specific amount of goods consumers are willing to buy at a specific price. The initial decrease in demand for incandescent bulbs is due to the substitution effect of cheaper LED lights, not a change in the price of the bulbs themselves.

"The Price of Compact LED Lights Fell Because of Improvements