Question

Reter to the diagram displaying the market for Music Downioads to the night The ines S, and D, represent original supply and demand resationships. Point A is the ongnas pont of equlibrium. The lines s, and D, represent outward (rightward) shifts. The ines S2 and D, represent nward (lettward) shfts S1 Read the tollowing shock or pair of shocks Use the pont drawng too, to identify the new port of equatitrun Latel this new port Shockis): An increase in the price of a sutstitute good (co's) Carefuly foliow the instructions above, and ony draw me required oects As a result, the equilibrium price w As a resun, the equilsbnium quatity i Dy and folow the instructions to create your graph

Answer 1

When the prices of the substitute goods increase, the demand for the given good will increase as people will prefer the given good over the substitute due to the lower prices. Therefore, demand curve will shift to the D₁ and the new equilibrium point is shown below as point B:

Therefore, as a result, the equilibrium price will remain constant.

As a result, the equilibrium quantity will increase.