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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
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 200- of a good demanded grows in response to the growth of purchases by other 180- Doo P150 individuals (as indicated by the demand curve "Demand" in the figure). Suppose that the price is initially $70 where the quantity demanded is 150 160- Demand (thousand CD players per month). 140- If the price of CD players falls to $50, demand will increase to 180 120- thousand CD players per month. (Enter your response using an integer.) Price 100- Of this increase, thousand units of the 30 thousand-unit increase is the 80 - pure price effect and thousand units of the increase is the bandwagon effect. 60- 40- 20 - D60 20 40 60 80 100 120 140 160 180 200 220 CD Players (thousands per month)
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