Business and Economics Discussion Questions
INSTRUCTIONS
Summary:
Although Electronic Arts (EA) Inc.’s new Star Wars game helped deliver strong results during the holiday season, EA will not release many new games in 2020 until a new generation of gaming consoles is available for consumers to buy.
Classroom Application:
Star Wars-related games and gaming consoles are complementary goods. Changes in demand for either product will lead to changes in the other product. The cross-price elasticity of demand measures the degree to which a change in the price of one product will result in a change in the quantity demanded of the other product.
Questions:
- Gaming consoles and videos games are complementary goods. The cross-price elasticity of demand measures the relationship between two complementary goods. Define the cross-price elasticity of demand.
- Would the cross-price elasticity of demand for EA’s Star Wars game and the PlayStation 5 video game console have a negative or positive value? Explain briefly.
- Electronic Arts competes with Activision Blizzard and Take-Two Interactive Software in the market for video games. The article refers to another source of competition in this market. What is this source of competition? In your opinion, will this be a more significant threat to Electronics Arts than the competition it faces from Activision and Take-Two? Explain your answer. Business and Economics Discussion Questions
- If Electronic Arts proposed a merger with either Activision Blizzard or Take-Two Interactive Software, would this be a horizontal merger a vertical merger? Explain the difference between these two types of mergers.
- The Antitrust Division of the United States Department of Justice can challenge proposed mergers. A merger between Electronic Arts and Activision Blizzard would increase the market share of the merged firm in the video games market. Cite one reason why the Justice Department might approve this merger despite the impact on market share in the market for video games.
- Use APA format, font 12, New Times Roman