Consider Figure 1.15. The graph shows a stylized demand curve for Blu-ray recorders.

(a) What are the endogenous variables in this model? (b) The price of a Blu-ray recorder is 1,500 Swiss francs. What is the quantity demanded? (c) If the price fell to only one-third of its previous level, what would market demand be? (d) The supply curve can be described by the following equation: P = 500 + 0.000025 * Quantity (f) It becomes unfashionable to waste time in front of the TV. Show how this change of preferences affects market demand. What will be the effect on the equilibrium price level and quantity? (g) Due to a new technology it becomes cheaper to produce Blu-ray recorders. How will that affect the diagram? (h) The government introduces a tax on Blu-ray discs. How will that affect the diagram? What happens if the government introduces a tax on visits to the cinema but does not levy a tax on Blu-ray discs?

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