Hollywood screenwriters negotiate a new agreement with movie producers stipulating that they will receive 10% of the revenue from every rental of a movie they wrote. They have no such agreement for movies shown on on-demand television.

a. When the new writers’ agreement comes into effect, what will happen in the market for movie rentals—that is, will supply or demand shift, and how? And, as a result, how will consumer surplus in the market for movie rentals change? Illustrate with a diagram. Do you think the writers’ agreement will be popular with consumers who rent movies?

b. Consumers consider movie rentals and ondemand movies substitutable to some extent. When the new writers’ agreement comes into effect, what will happen in the market for on-demand movies—that is, will supply or demand shift, and how? And, as a result, how will producer surplus in the market for on-demand movies change? Illustrate with a diagram. Do you think the writers’ agreement will be popular with the cable television companies that show on-demand movies? More consumers are shifting their movie-watching preferences from Redbox rentals to streaming services like Netflix and Amazon Prime. What will happen in the market for movie rentals after the shift in movie preferences? How will producer surplus in the market for movie rentals change? Illustrate with a diagram. How will the shift to streaming movies affect movie rental companies and Hollywood screenwriters?