Using Supply-And-Demand Diagrams, Show and Explain the Effects of the Following

question 126

Essay

Using supply-and-demand diagrams, show and explain the effects of the following events on the price of CD-Rs and the quantity of CD-Rs sold. For each event, identify which of the determinants of demand or supply is affected, how it influences demand or supply, and what happens to the equilibrium price and quantity.
a) The price of a CD burner falls.
b) Workers who make CD-Rs get a pay raise.
c) Producers introduce new cost-saving technologies in their CD-R production plants.
d) Consumers' incomes increase and CD-Rs are a normal good.
e) Free peer-to-peer music exchange through the Internet becomes legal.

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Definitions:

Shift

A change in the position of a demand or supply curve, indicating a change in the quantity demanded or supplied at every price.

Subsidy

Financial aid supplied by the government to an industry or business, with the aim of keeping prices low for consumers or aiding the business to be competitive.

Efficiency Loss

Economic costs that arise when market equilibrium is not achieved, or when resources are not allocated optimally, leading to waste or suboptimal outcomes.

Deadweight Loss

The loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved or is not achievable.