200- Consider the market for CD players, illustrated in the figure to the right. Suppose there are network externalities

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200 Consider The Market For Cd Players Illustrated In The Figure To The Right Suppose There Are Network Externalities 1 (181.06 KiB) Viewed 35 times

200- 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 $70 where the quantity demanded is 150 (thousand CD players per month). 180- Doo D150 160- Demand 140- 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.) 120- Price 100- Of this increase, 10 thousand units of the 30 thousand-unit increase is the pure price effect and 20 thousand units of the increase is the bandwagon effect. 80 60- 40- The bandwagon effect causes the demand for CD players to be more than would otherwise be the case (without network externalities). 20 60 D120 P180 0 0 20 40 60 80 100 120 140 160 180 200 220 CD Players (thousands per month)