Bpp learning Media is an acca approved Content Provider

QUESTION 
Substitutes and complements
 
In County X, a recent fall in the price of DVDs has seen demand for DVDs increase significantly. 
However, cinema operators have reported a decline in customer numbers, which they believe is due to 
people preferring to buy DVDs to watch rather than going to the cinema. 
What effect is the fall in the price of DVDs likely to have on the demand curves for: 
(a) DVD 
players? 
(b) Cinema 
tickets? 
ANSWER 
(a) 
There is likely to have been an outward shift in the demand curve for DVD players. DVD players 
are complements to the DVDs themselves because people will need to buy the DVD players in 
order to watch their DVDs. So, the increased demand for DVDs will lead to an increase in 
demand for DVD players even though their price may be unchanged. This results in an 
outward 
shift 
in their demand curve (an expansion of demand). 
(b) 
There is likely to be an inward shift in the demand curve for cinema tickets (a contraction of 
demand). Even though the price of cinema tickets has not changed, people are demanding less of 
them because they are choosing to watch DVDs instead. Cinema tickets are a substitute product 
to DVDs, and a fall in the price of a substitute leads to an inward shift of the demand curve for a 
product. 
 
 EXAM FOCUS POINT 
The difference between a change in demand and a shift of the demand curve is of fundamental 
importance. Remember: 
(a) Movements along a demand curve (contractions or expansions) for a good are caused solely by 
changes in its price. 
(b) Variations in the conditions of demand create shifts in the demand curve. 
BPP Tutor Toolkit Copy

---

CHAPTER 4
//
MICROECONOMIC FACTORS