During the Dot-Com Bubble, Consumers Believed That the Internet Would

question 69

Multiple Choice

During the dot-com bubble, consumers believed that the Internet would radically change the shopping experience and lead to higher incomes throughout the economy. How would the dot-com bubble be best represented in the AD/AS model?

• A) The aggregate demand curve shifts right.
• B) The aggregate demand curve shifts left.
• C) Prices increase along the aggregate demand curve.
• D) Prices decrease along the aggregate demand curve.

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Definitions:

Information About Quality

Knowledge or data regarding the characteristics or attributes of a product or service that determine its overall value to a consumer.

Product-Variety Externality

External benefits or costs to society resulting from a variety of products beyond what would be provided by market forces alone.

Business-Stealing Externality

A negative externality that occurs when new products or services enter a market, reducing the sales and profitability of existing products or services.

Spillover Costs

Costs that affect parties who are not directly involved in a transaction or economic activity.