4. Suppose angioplasty (AGP) and coronary artery bypass graft surgery (CABG) are

Question

4. Suppose angioplasty (AGP) and coronary artery bypass graft surgery (CABG) are substitute treatments for coronary artery disease. What will happen in the market for AGP procedures if a new CABG technique is introduced that is less invasive and requires a shorter recovery period? a. Both price and quantity will increase. b. Both price and quantity will decrease. c. Price will increase and quantity will decrease. d. Price will decrease and quantity will increase. e. There is not enough information to answer this question. Hint: It may be useful to sketch a picture of each of the scenarios described in questions 2-4. Feel free to see me if you would like some help doing this.

Explanation / Answer

The correct option is B) both price and quantity will decrease.

Since a new CABG technique is introduced, now people will demand less AGP procedure so demand for AGP will decrease whereas the supply stays constant. This implies the equilibrium price and quantity will decrease.

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