Question

In: Economics

4. For each market whose product is highlighted in italics, identify whether each of the following...

4. For each market whose product is highlighted in italics, identify whether each of the following trends represents an increase or decrease in demand or an increase or decrease in quantity demanded. How would you describe each change in graphical terms?

a. The drop in the monthly subscription rate changes the number of subscribers to a cable TV provider.

b. The quantity of canned milk purchased adjusts due to a decrease in consumer incomes.

c. The price of a particular brand of perfume rises, leading to a change in sales

d. A rise in the popularity of free online games changes how many computer games consumers choose to purchase

Solutions

Expert Solution

ANS-4 a) Drop in monthly subscription rate changes the number of subscribers to a cable TV provider .

EFFECT : 1. The demand decreases for cable TV due to drop in subscription rate . The demand curve shifts from D to D1 .

2. The supply curve faces a contraction of quantity supplied from E to E1.

3. The equilibrium price decreases from P to P1.

.4. The equilibrium qty decreases from Q toQ1.

ans-4 b) The quantity of canned milk purchased adjusts due to a decrease in consumer incomes .

EFFECT -: 1. The demand for canned milk falls due to decrease in consumer income . The demand curve shifts from D to D1.

2. The supply curve faces a contraction of quantity supplied from E to E1.

3. The equilibrium price decreases from P to P1.

4. The equilibrium qty decreases from Q toQ1.

Ans- 4c ) The price of particular brand of perfume rises leading to a change in sales.

EFFECT -: 1. The demand curve faces a contraction of quantity demanded from E to E1 due to rise in prices from P to P1.

2. DUE TO CONTRACTION IN DEMAND , THE SUPPLY CURVE SHIFTS LEFTWARDS (DECLINE) FROM S TO S1.

(Note : If the change in sales is for some other brand then a change in price of particular brand will decrease its sales and the consumers will shift to other brand which will face an increase in demand . Thus the prices of that brand will also rise and there will extension in quantity supplied)

MARKET FOR PARTICULAR BRAND OF PERFUME -:

MARKET FOR OTHER BRAND OF PERFUME -:

(NOTE-: IT was not clearly mentioned as to what market needs to be addressed so I have given both the markets.The explanation for 2nd market is in note mentioned above)

Ans - 4 d) A rise in popularity of free online games changes how many computer games consumers choose to purchase.

EFFECT -: 1. Computer games and online games are substitutes to each other . The rise in demand of online games will lead to a decline in demand for computer games. The demand curve for computer games will decrease from D to D1 and the demand for online games will increase from D to D1.

2. The supply curve will face contraction of quantity supplied in computer games market and there will be extension along the supply curve in online games market.

3. The price for computer games will decline from P to P1.

And the price for online games will increase from P to P1.

MARKET FOR COMPUTER GAMES -:

MARKET FOR ONLINE GAMES -:

NOTE -: I have mentioned both markets for this part as it was not clear as to what market needs to addressed .

Rahul Sunny answered 2 months ago

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