Final answer:
The statement is false; an increase in the price of iPhone apps is expected to decrease the quantity demanded, not the demand itself. Additionally, price decreases lead to an increase in quantity demanded due to the substitution effect, income effect, and perceived value. However, the effects of further price decreases on demand are not guaranteed to be identical to past observations.
Step-by-step explanation:
An increase in the price of iPhone apps will typically lead to a decrease in the demand for iPhone apps. This statement is false because it confuses the concepts of demand and quantity demanded. Demand refers to the entire relationship between prices and the quantities that consumers are willing and able to buy at each price level, represented by the demand curve. However, what the question suggests is a movement along the demand curve, which is referred to as a change in quantity demanded. According to the law of demand, if the price of iPhone apps increases, the quantity demanded will decrease, not the demand itself.
Three reasons a decrease in a product's price leads to an increase in quantities purchased include the substitution effect, the income effect, and the perception of increased value. The substitution effect occurs when consumers choose cheaper alternatives over more expensive ones. The income effect happens because a price decrease effectively increases consumers' buying power. Additionally, when a product becomes cheaper, consumers may perceive the product as offering more value compared to when it was more expensive.