In the following cases, explain what will happen to the demand for the good and/or the...
In the following cases, explain what will happen to the demand for the good and/or the quantity demanded of the good. Explain how the change would be shown on a graph of the demand curve.
I. DIRECTV and Netflix are substitutes. What is the effect on DIRECTV subscriptions if the price of Netflix falls?
II. Tickets to the Westminster dog show are normal goods. What is the effect on dog show tickets of an increase in consumers' incomes?
Homework Answers
I There is fall in the price of the substitute good. This will
increase its quantity demanded and so the demand for DIRECTV will
decrease. Hence the demand for DIRECTV subscriptions will decrease
and the demand curve shifts to the left. The price for DIRECTV
subscriptions declines as a result while quantity exchanged also
declines
.
II An increase in consumers' incomes would increase the demand for normal goods. Since tickets to the Westminster dog show are normal goods, the demand for these tickets increases. This implies that the demand curve shifts to the right. The price of dog show tickets as well as the quantity exchanged increases as result
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