Question

Toshiba just introduced a 32'" plasma screen TV for $800. Sony offers the same size TV for $900. What will happen to the demand of Sony's TVs based on Toshiba's new price. Explain.

Answer 1

The demand for Sony's TVs is likely to decrease due to Toshiba's lower price.

Step-by-step explanation:

Based on the information provided, the demand for Sony's TVs is likely to decrease due to Toshiba's new lower price. When two products are considered substitutes, a decrease in the price of one product usually leads to a decrease in demand for the other product. In this case, Toshiba and Sony are both offering 32-inch plasma screen TVs, but Toshiba is selling their TV for $100 less than Sony. As a result, consumers are likely to choose the lower-priced Toshiba TV, leading to a decrease in demand for Sony's TVs.