Answer to Question #307489 in Microeconomics for Roo

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.