Asked by
hannah leaphart
on Oct 25, 2024
Verified
Refer to Figure 4.5.1 above. When demand increases from #1 to D2,
A) the pure price effect moves the market from A to B, and the externality effect from B to C.
B) the pure price effect moves the market from B to C, and the externality effect from A to B.
C) the pure price effect moves the market from A to C, and the externality effect from C to B.
D) the pure price effect moves the market from A to B, and the externality prevents the move from B to C.
Pure Price Effect
The impact on consumer demand and behavior resulting solely from a change in the price of a good or service, with income and substitution effects considered separately.
Externality Effect
The impact of one person's actions on the well-being of a bystander, which may be positive or negative and not reflected in market prices.
- Acquire knowledge about the principle of network externalities and its effects on market demand.
Verified Answer
MS
Learning Objectives
- Acquire knowledge about the principle of network externalities and its effects on market demand.