Read Eye on Song Downloads and Streaming on pp. 334335, then draw a students budget lines for
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Read Eye on Song Downloads and Streaming on pp. 334–335, then draw a student’s budget lines for single songs versus other goods and services in 2000 and 2015. Explain why the budget line changed between 2000 and 2015.
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# EYE on SONG DOWNLOADS AND STREAMING How Much Would You Pay for a Song? We can work out the willingness to pay for a song by finding the demand curve for songs and then finding the consumer surplus. To find the demand curve, we need to look at the expen- ditures, quantities, and prices in the market for songs. In 2015, Americans spent $6.3 bil- lion on all forms of recorded music, down from $14 billion in 2000. But the combined quantity bought increased from I billion in 2000 to 1.5 billion in 2015 and the average price of a unit of recorded music fell from $14 to $4.28. The average price fell because the mix of formats changed dramatically. In 2000, we bought almost I billion CDs, but in 2015 we bought only 98 million. Instead of buying CDs, we downloaded 1.3 billion music files and paid for 16 million streaming subscriptions. Figure I shows the longer history of the changing formats of recorded music. The music that we buy is several different goods. We'll distinguish singles from albums and focus on the demand for singles. In 2000, we bought 100 million singles at an average price of $5.00. In 2015, we downloaded 1,200 million singles at an average price of $1.20. Figure 2 shows the demand curve in the market for singles. One point on the demand curve is the 2000 price and quantity 100 million at $5.00 per single. Another point on the demand curve is that for 2015-1,200 million singles downloaded at $1.20 each. If the demand curve has not shifted and is linear (assumed here), we can calculate the change in consumer
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