Question

you are considering two cable networks for your television. tata sky charges rs. 120 per month regardless of the channels watched. hathway on the other hand charges rs. 1/ channel per month. your monthly channel demand is given by the equation cp 150-50 p, where p is the price per channel. (1) how many channels per month will you watch with each network? (ii) based on consumer surplus obtained, which provider should you choose

Answer 1

Tata sky charges $rs. 120$ per month regardless of the channels watched.

Hathway on the other hand charges $rs. 1$ per channel per month.

Demand equation is given as:

$Cp=150-50p$

$P= rs. 1$

$Cp=150-50(1)$

$Cp=100$

Hence 100 channels watched per month.

Hathway charges will be $=100*1=rs. 100$ per month

Tata sky charges $rs. 120$ per month

Hence Hathway is the better option.