Many movie consumers who used to rent DVDs are now patronising online video rentals, especially, streaming services.a. What impact did the advent of online video rentals and streaming have on the in-store movie industry? Use the demand and supplydiagram to illustrate your answer. Pay attention to how the equilibrium quantity and price adjust. Make state all your assumptions. b. Which would be more price elastic, the demand for Netflix online streaming or the demand for online movie rentals in general? Explain.c. Would the cross-price elasticity of demand for online movie rentals and in-store movie rentals be positive or negative? What does youranswer imply for the equilibrium price and quantity of online movie rentals? Use the demand and supply diagram to illustrate youranswer. d. Because of COVID-19 most people are staying indoors, yet they cannot afford online streaming movies, like Netflix. Should thegovernment regulate the price of online streaming? In your answer, critically discuss the pros and cons of price regulation.
Many movie consumers who used to rent DVDs are now patronising online video rentals, especially, streaming services.
a. What impact did the advent of online video rentals and streaming have on the in-store movie industry? Use the
diagram to illustrate your answer. Pay attention to how the
b. Which would be more price elastic, the demand for Netflix online streaming or the demand for online movie rentals in general? Explain.
c. Would the cross-price elasticity of demand for online movie rentals and in-store movie rentals be positive or negative? What does your
answer imply for the
answer.
d. Because of COVID-19 most people are staying indoors, yet they cannot afford online streaming movies, like Netflix. Should the
government regulate the price of online streaming? In your answer, critically discuss the pros and cons of price regulation.
Hello, thank you for the question. Since there are multiple sub-part questions asked here, only the first three sub-parts will be answered and if you need an answer to any other sub-part, please repost the question by mentioning the sub-part number.
Demand refers to the total quantity that the buyers willing to buy at the particular price level.
Substitute goods are those goods that are used for the same purpose. For example, Tea and coffee are used for the same purpose. Thus, these goods are substitute goods.
a. The movie DVD and streaming online movie are substitute goods since both the used to watch movie. The introduction of online streaming movie reduces the demand for DVD movie. This is shown in the below diagram.
The DVD market is in equilibrium at point ‘E’ where the demand nd supply is equal. At this point price is ‘P’ and quantity is ‘Q’. Th introduction of online streaming, reduces the demand for TV which in turn shifts the demand curve to demand D1. This leads to reduces the price to ‘P1’ and quantity to ‘Q1’.
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