Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 4, Problem 1DQ
To determine
Distinguish the
Expert Solution & Answer
Explanation of Solution
Rent of the videos depends upon its price in the market, if it is low, the consumer may prefer to consume more videos. If the rental cost is high, he would not prefer to consume.
The demand curve for video shows the relationship between its price and its quantity demand at different prices (keep other factors constant). Thus, the origin of demand curve is developed by plotting the demand for videos at different prices in a figure and draws a line through the plotted point and it gives the shape of the demand curve. The term quantity demanded depends on the product price, income of the consumer, and price of other product. If there is high price for a video, the quantity demanded for video would decrease, because at high price people are reluctant to consume more quantity. Thus, the shape of the demand curve of video is downward sloping. It shows the negative relationship between the price and quantity demanded.
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Chapter 4 Solutions
Economics: Principles & Policy
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