Future Business Leader Achievments (FBLA) Economics Practice Exam

Which of the following will result in more cassette tapes being bought and sold at a higher price?

1. Decrease in the cost of producing cassettes

2. Decrease in the price of CDs

3. Decrease in consumer incomes

4. Decrease in price of cassette players

The correct answer is: Decrease in price of cassette players

The answer revolves around the relationship between the price of cassette players and the demand for cassette tapes. When the price of cassette players decreases, they become more affordable for consumers, which can lead to an increase in consumers purchasing cassette players. As more people acquire cassette players, the demand for cassette tapes rises since consumers will need tapes to play on their new devices. In this scenario, the increase in demand for cassette tapes, driven by the increased sales of cassette players, can lead to a situation where more cassette tapes are bought and sold at higher prices. This relationship illustrates the principles of supply and demand, where an increase in demand, all else being equal, typically leads to an increase in price. On the other hand, factors such as a decrease in the cost of producing cassettes or a decrease in the price of CDs might not have the same effect on the sales of cassette tapes. A decrease in consumer incomes could lead to reduced purchasing power, which generally does not promote higher sales or prices for non-essential goods like cassette tapes.