Many users were left aghast when, for the first time ever, Spotify announced they are raising subscription prices. The Premium Family Plan is rising from $14.99 to $15.99 a month. Source: techradar.com, May 2, 2021 Assume that the marginal social cost of streaming is zero. (This assumption means that the cost of operating a streaming service doesn't change if more people stream more songs.) Also assume the market demand is linear. (1) Draw a graph of the market for streaming music with a price of $15 a month. On your graph, show consumer surplus and producer surplus. (2) With a price of $15 a month, is the market efficient or inefficient? If it is inefficient, show the deadweight loss on your graph. (upload your graph)
Many users were left aghast when, for the first time ever, Spotify announced they are raising subscription prices. The Premium Family Plan is rising from $14.99 to $15.99 a month. Source: techradar.com, May 2, 2021 Assume that the marginal social cost of streaming is zero. (This assumption means that the cost of operating a streaming service doesn't change if more people stream more songs.) Also assume the market demand is linear. (1) Draw a graph of the market for streaming music with a price of $15 a month. On your graph, show consumer surplus and producer surplus. (2) With a price of $15 a month, is the market efficient or inefficient? If it is inefficient, show the deadweight loss on your graph. (upload your graph)
Chapter6: Demand Relationships Among Goods
Section: Chapter Questions
Problem 6.4P
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Transcribed Image Text:Many users were left aghast when, for the first time ever, Spotify announced they are raising
subscription prices. The Premium Family Plan is rising from $14.99 to $15.99 a month.
Source: techradar.com, May 2, 2021
Assume that the marginal social cost of streaming is zero. (This assumption means that the
cost of operating a streaming service doesn't change if more people stream more songs.)
Also assume the market demand is linear.
(1) Draw a graph of the market for streaming music with a price of $15 a month. On your
graph, show consumer surplus and producer surplus.
(2) With a price of $15 a month, is the market efficient or inefficient? If it is inefficient, show
the deadweight loss on your graph. (upload your graph)
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