Introductory to Microeconomics
Solution of Case 2.1
What determines demand?
1 How would you represent each of the following?
(a) The effect on demand for furniture of a furniture company changing its products from being
already assembled to requiring buyers to assemble the products;
(b) The effect on demand for lamb of the discovery of mad cow disease in beef products;
(c) The effect on demand for texting of the increased popularity of TV shows with viewer voting such
as Australian Idol; and
(d) The effect on demand for DVDs of TV shows having the same TV shows available for downloading
on the internet.
(a) Requiring consumers to assemble the furniture products increases the time cost to consuming
these products. Hence we would expect demand to decrease.
(b) Lamb and beef are substitutes. Discovery of mad cow disease in beef will decrease its
attractiveness to consumers. Hence we would expect demand for lamb to increase.
(c) Texting and TV shows that require viewer participation can be considered to be complementary
products. Hence an increase in demand for TV shows with viewer participation would be expected
to increase demand for texting.
(d) Having a TV show downloadable on the internet is a substitute for having a DVD of that TV show.
Introduction of a new substitute would be expected to decrease demand for a product. Hence we
would expect demand for DVDs of TV shows to decrease.
2 Can you think of other factors apart from those described in the examples above that might affect
demand?