Question 2 [25 marks]

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. (5 marks)

b) Workers who make CD-Rs get a pay raise. (5 marks)

c) Producers introduce new cost-saving technologies in their CD-R production plants.

(5 marks)

d) Consumers' incomes increase and CD-Rs are a normal good. (5 marks)

e) Free peer-to-peer music exchange through the Internet becomes legal. (5 marks)