Chapter 3, Problem 3P

To determine

Consider the market for cable-based internet access service which is a normal good. Explain whether the following events would cause an increase or decrease in demand or an increase or a decrease in the quantity demanded.

a) Firms providing wireless (an alternative to cable) internet access services to reduce their prices.

b) Firms providing cable based internet access services reduce their prices.

c) There is a decrease in the income earned by consumers of cable based internet access services.

d) Consumers’ tastes shift away from using wireless internet access and in favour to cable based internet access services.

Content information:

Demand refers to the quantity of goods demanded at a given set of prices. Change in demand leads to a shift in the demand curve. At a given price, demand for the good can change due to factors such as change in income, taste and preference, change in price of related goods, etc.

Quantity demanded refers to the quantity of goods demanded at a given price at a given point in time. Change in quantity demanded leads to a movement along the demand curve. Movement along the demand curve occurs when the price of the good changes.