Exercise on Shifts in Demand and Supply: Solution-3 (Event C)
Questions: Use the three-step method to analyze the effects of each event on the equilibrium price and quantity of game downloads.
- Event A: A fall in the price of USBs
- Event B: Sellers of games downloads negotiate a reduction in the royalties they must pay for each game they sell.
- Event C: Events A and B both occur.
Event C: Events A and B both occur.
- Both curves shift (see parts A & B).
- D shifts left, S shifts right.
- P unambiguously decreases.
Effect on Q is ambiguous:
The fall in demand reduces Q,
the increase in supply increases Q.
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Date of last modification: 2019