(Solved) "The price of compact fluorescent light bulbs fell because of improvements in production ...

"The price of compact fluorescent light bulbs 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.

• The statement is false. A decrease in the price of compact fluorescent light bulbs 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.

• The statement is false because the demand for incandescent light bulbs would increase as the price of compact fluorescent light bulbs fell.

• The statement is false because compact fluorescent light bulbs producers would not reduce their prices as a result of improvements in technology; doing so would reduce their profits.

• The statement is false because it confuses the law of demand with the law of supply.

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"The price of compact fluorescent light bulbs fell because of improvements in production ...

Microeconomics

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