When music downloading was introduced, what impact did that have on the demand curve for CDs?
What will be an ideal response?
Downloading music decreased the need for CDs as a distribution medium, lowering the demand for CDs. The demand curve shifted to the left, and the equilibrium shifted down along the supply curve, causing lower prices and lower quantities. (Also note that an older student may point out that the digitization of music initially increased the need for blank CDs, as downloaders would burn the files to CD to be played in CD players.)
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The above figure shows the market for blouses. The government decides to impose the sales tax on sellers, as shown in the figure. How much producer surplus is lost?
A) $10,000 B) $20,000 C) $25,000 D) $40,000
Suppose two Cournot duopolist firms operate at zero marginal cost. The market demand is p = a - bQ. Firm 1's best-response function is
A) q1 = (a - bq2)/2b. B) q1 = (a - 2bq2)/2b. C) q1 = a/b. D) q1 = a/2b.