Answer to Question #118283 in Macroeconomics for Lerato Maledu

Question

Discuss the impact of the consumer experience an increase in income economic events on the equilibrium price and quantity according to the demand and supply model

Answer 1

According to the Pew Research Center for People and the Press, more and more people—especially younger people—are getting their news from online and digital sources. The majority of US adults now own smartphones or tablets, and most of those Americans say they use these devices in part to get the news. From 2004 to 2012, the share of Americans who reported getting their news from digital sources increased from 24% to 39%.

How has this shift in behavior affected consumption of print news media and radio and television news?

Let's use our four-step process again to figure it out. You'll find all the info you need in the demand and supply model below.

In this case, we want our demand and supply model to represent the time before many Americans began using digital and online sources for their news. You'll notice in this demand and supply model—above—that the analysis was performed without specific numbers on the price and quantity axes.

A change in tastes from traditional news sources—print, radio, and television—to digital sources caused a change in demand for the former.

A shift to digital news sources will tend to mean a lower quantity demanded of traditional news sources at every given price, causing the demand curve for print and other traditional news sources to shift to the left, from D₀ to D₁

The new equilibrium E₁—occurs at a lower quantity and a lower price than the original equilibrium—E₀

So, what do we know now about the effect of the increased use of digital news sources? We know—based on our four-step analysis—that fewer people desire traditional news sources, and that these traditional news sources are being bought and sold at a lower price.