Over the last two decades the combination of the internet, high definition TV, and the surround sound has revolutionized watching a movie at home. At the same time, advances in technology in the movie theater have raised the standard that the home entertainment alternative must achieve. Think about the effects of these technological changes on movie watching and identify another market for related goods or service where one will expand and the other will contract. Describe in detail the sequence of events as the two related items you've identified respond to the new technologies.

What will be an ideal response?

The markets your students choose likely are different than the markets discussed here. But the effects sketched here should be similar in your students' answers. An example of a market that will expand is the market for electric cars. As more people own electric cars and charging stations proliferate, the demand for those cars increases. The firms producing them earn an economic profit in the short run. But as time passes, more firms enter this market. The price of an electric car falls and in the long run, the firms producing those cars earn only a normal profit. An example of a market that might contract is the market for live attendance at sporting events because the quality of watching the events at home increases. The demand for attending a live sporting event will likely decrease, especially second tier live sporting events. The price of a ticket to live sporting events falls and the firms producing live sporting events incur economic losses. As time passes, some of the firms exit the market and, in the long run, the remaining firms earn a normal profit. Other examples might be solar and electric energy, online and campus college education, and organic and non-organic food.