Exercise on Demand Curve Shifters: Solutions

Questions: Draw a demand curve for music downloads. Explain the consequences in the following:
  1. The price of CDs falls
  2. The price of music downloads falls
  3. The price of iPods falls
Solutions:
CDs and music downloads are substitutes.
Therefore, a fall in price of CDs shifts demand for music downloads to the right. See figure below:

Fall of CD Price

When the price of music downloads falls, the D curve does not shift
but it moves down along curve to a point with lower P, higher Q. (See below)
fall-price-music-download

iPods ane music downloads are complements. Hence, as illustrated in the figure below,
a fall in price of iPods shifts the demand curve for music downloads to the right.
Fall of CD Price


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Date of last modification: 2019