Exercise on Demand Curve Shifters: Solutions
Questions: Draw a demand curve for music downloads. Explain the consequences in the following:
- The price of CDs falls
- The price of music downloads falls
- The price of iPods falls
CDs and music downloads are substitutes.
Therefore, a fall in price of CDs shifts demand for music downloads to the left.
Reminder: Two goods are substitutes if an increase in the price of one causes an increase in demand for the other.
See figure below:
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)
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.
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Date of last modification: 2023