Economics Plus MyLab Economics with Pearson eText (2-semester Access) -- Access Card Package (6th Edition) (The Pearson Series in Economics)
6th Edition
ISBN: 9780134417295
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 5, Problem 5.4.10PA
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Consider the market for CD players, illustrated in the figure to the right. Suppose there are network
externalities in this market such that the quantity of a good demanded grows in response to the
growth of purchases by other individuals (as indicated by the demand curve "Demand" in
the figure). Suppose that the price is initially $110 where the quantity demanded is 90 (thousand
CD players per month).
If the price of CD players falls to $50, demand will increase to thousand CD players per month.
(Enter your response using an integer.)
of this increase, thousand units of the 90 thousand-unit increase is the pure price effect and
thousand units of the increase is the bandwagon effect.
The bandwagon effect causes the demand for CD players to be more
otherwise be the case (without network externalities).
▼than would
200-
180
160 Demand
140
120-
100-
80-
60-
40-
20-
0+
0
Deo
20
D150
D80 P120 P180
40 60 80 100 120 140 160 180 200 220
CD Players (thousands per month)
Q
Next
Consider the market for CD players, illustrated in the figure to the right. Suppose
there are network externalities in this market such that the quantity of a good
demanded grows in response to the growth of purchases by other individuals (as
indicated by the demand curve "Demand" in the figure). Suppose that the price is
initially $90 where the quantity demanded is 120 (thousand CD players
per month).
If the price of CD players falls to $50, demand will increase to 180 thousand CD
players per month. (Enter your response using an integer.)
Of this increase,
price effect and
thousand units of the 60 thousand-unit increase is the pure
thousand units of the increase is the bandwagon effect.
C
Price
200-
180-
160-
140-
120+
100-
80-
60-
40-
20-
0+
0
Doo
Demand
20
P150
D60 P120 180
40 60 80 100 120 140 160 180 200 220
CD Players (thousands per month)
Question 10
Which of the following startements about network externalities is CORRECT?
Air pollution is an example of a network externality.
For a good with network externalities, the number of people who are willing to
buy a unit of the good is uniquely determined by the price.
Network externalities are always positive.
The manufacturer of a new good with network externalities might give away a
free version of the good.
For a good with network externalities, one person's valuation of the good is
always increasing in the number of other people using the good.
Chapter 5 Solutions
Economics Plus MyLab Economics with Pearson eText (2-semester Access) -- Access Card Package (6th Edition) (The Pearson Series in Economics)
Ch. 5 - Prob. 5.1.1RQCh. 5 - Prob. 5.1.2RQCh. 5 - Prob. 5.1.3RQCh. 5 - Prob. 5.1.4RQCh. 5 - Prob. 5.1.5RQCh. 5 - Prob. 5.1.6PACh. 5 - Prob. 5.1.7PACh. 5 - Prob. 5.1.8PACh. 5 - Prob. 5.1.9PACh. 5 - In a study at a large state university, students...
Ch. 5 - Prob. 5.1.11PACh. 5 - Prob. 5.1.12PACh. 5 - Prob. 5.1.13PACh. 5 - Prob. 5.2.1RQCh. 5 - Prob. 5.2.2RQCh. 5 - Prob. 5.2.3RQCh. 5 - Prob. 5.2.4PACh. 5 - Prob. 5.2.5PACh. 5 - Prob. 5.2.6PACh. 5 - Prob. 5.2.7PACh. 5 - Prob. 5.2.8PACh. 5 - Prob. 5.2.9PACh. 5 - Prob. 5.2.10PACh. 5 - Prob. 5.2.11PACh. 5 - Prob. 5.3.1RQCh. 5 - Prob. 5.3.2RQCh. 5 - Prob. 5.3.3RQCh. 5 - Prob. 5.3.4PACh. 5 - Prob. 5.3.5PACh. 5 - Prob. 5.3.6PACh. 5 - Prob. 5.3.7PACh. 5 - Prob. 5.3.8PACh. 5 - Prob. 5.3.9PACh. 5 - Prob. 5.3.10PACh. 5 - Prob. 5.3.11PACh. 5 - Prob. 5.3.12PACh. 5 - Prob. 5.3.13PACh. 5 - Prob. 5.3.14PACh. 5 - Prob. 5.3.15PACh. 5 - Prob. 5.3.16PACh. 5 - Prob. 5.4.1RQCh. 5 - Prob. 5.4.2RQCh. 5 - Prob. 5.4.3RQCh. 5 - Prob. 5.4.4PACh. 5 - Prob. 5.4.5PACh. 5 - Prob. 5.4.6PACh. 5 - Prob. 5.4.7PACh. 5 - Prob. 5.4.8PACh. 5 - Prob. 5.4.9PACh. 5 - Prob. 5.4.10PACh. 5 - Prob. 5.4.11PACh. 5 - Prob. 5.4.12PA
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