Assume that individuals’ income remains unchanged with and without social distancing…. 1 answer below »
- 2. In what follows, ignore the negative impact that social distancing has on individuals’ income. Assume that individuals’ income remains unchanged with and without social distancing. Now that people are “social distancing” and are on home quarantine they are spending significantly more time at home and have more free time since they do not need to commute to work. In part (a), (b) and (c), you need to discuss how the market moves (what happens to supply and demand) and thus what happens to the equilibrium price and quantity. (5 marks) a. Ceteris paribus, describe with graph and words what happens in the market for online moving streaming, e.g. Netflix. Assume there is only oneonline moving streaming service. You do not need to consider the market for other goods. (2 marks)
- b. Given you answer to part 2a above, now consider the impact on the market for books, which is a perfectly competitive market (consider both digital and print books as a single category). Your answer should consider two key “facts” of the case: (1) people have more time at home and (2) people are watching more movies. (2 marks)
- c. Given your answer to part 2a above, now consider the impact on the market for popcorn. You should assume that even in the time of the pandemic, people enjoy eating popcorn while watching a movie. (1 mark)
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