Which of the following would cause the demand curve of iPhones to increase (i.e. shift)? Assume...

Which of the following would cause the demand curve of iPhones to increase (i.e. shift)? Assume that iPhones are a normal good.

		A decrease in the cost of glass screens used to make smart phones
		An increase in Samsung Galaxy prices, where Samsung Galaxy is a substitute for iPhones.
		A decrease in the level of incomes for the average household
		An increase in the supply for iPhones

Solutions

Expert Solution

An increase in Samsung Galaxy prices, where Samsung Galaxy is a substitute for iPhone

Change in the price of substitute goods is an important determinant of demand. Substitute goods are those goods which can be substituted for each other or can be used in place of each other. In case of such goods, increase in the price of one substitute causes an increase in the demand for the other substitute. So when price of Samsung Galaxy increases, demand for iPhone will increase because both the phones are substitute for each other.

Other option are incorrect because -

*A decrease in the cost of glass screens used to make smart phones will affect the supply because change in cost of production is a determinant of supply and hence demand won't get affected.

*A decrease in the income will decrease the demand of iPhone because iPhone is a normal good. Normal goods are those goods whose demand increase with an increase in income and vice versa.

*An increase in the supply of iPhone is a determinant of supply and hence won't affect demand for iPhone.

Rahul Sunny answered 1 year ago

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