QQuestionAnatomy and Physiology
QuestionAnatomy and Physiology
Video Ezy is a movie rental store that has seen its revenues fall significantly over the past decade. Experts largely attribute the fall to a rise in online streaming services (such as Netflix) that provide a different form of access to movies.
1. Netflix is a substitute to Video Ezy.
2. The increased availability of a substitute has caused a left shift in demand for Video Ezy products.
3. A decrease in the price of Video Ezy rentals would result in a positive movement in demand.
Which of the above statements are true:
Only 1 is true.
Only 2 is true.
Both 1 and 2 are true.
Both 2 and 3 are true.
All three are true.
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Answer
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Step 1:: Identify the true statements
To determine the accuracy of each statement, we need to analyze them one by one.
Step 2:: Analyzing Statement 1
Netflix is indeed a substitute for Video Ezy, as it offers an alternative way to access movies without renting physical copies from Video Ezy. Therefore, Statement 1 is true.
Step 3:: Analyzing Statement 2
An increase in the availability of a substitute, such as Netflix, can cause a left shift in demand for Video Ezy products. This means that as more alternatives become available, the demand for Video Ezy's services decreases. Hence, Statement 2 is also true.
Step 4:: Analyzing Statement 3
A decrease in the price of Video Ezy rentals would generally lead to an increase in quantity demanded, assuming other factors remain constant (this is known as the law of demand). However, this does not necessarily mean that there will be a positive movement in demand. A movement along the same demand curve is not considered a change in demand. Therefore, Statement 3 is not necessarily true.
Final Answer
Both Statements 1 and 2 are true.
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