What happens to equilibrium price and quantity for products

Reference no: EM13219232

E-books and e-book readers (like Amazon's Kindle or Barnes and Noble's Nook) are complements. E-books and the paper book versions of the same books are substitutes. Assume that copyright holders originally demand a higher price for e-books than for paperback books. Then they relent and allow publishers to sell e-books for a lower fee. Show what happens to the equilibrium price and quantity for each product. Assume that for e-book readers, e-books, and paper books, the original price and quantities are respectively: ($150, 3 million), ($12, 20 million), and ($14, 300 million) Explain how each market is affected. Show what direction these variables will move: bigger or smaller (you can make up exact numbers as long as they go in the right direction). Show all three graphs and make sure you tell me what happens to all three prices and quantities.

Reference no: EM13219232

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