An economic downturn that decreases household wealth and erodes consumer confidence will primarily affect the market for online music as follows:
- Since online music is a normal good, a decrease in household wealth and consumer confidence will reduce consumers' willingness and ability to purchase online music, causing the demand curve to shift leftward (decrease in demand)
- The supply curve for online music is unlikely to shift directly due to changes in consumer wealth or confidence, as these factors mainly influence demand rather than producers' costs or technology. Therefore, supply remains relatively unchanged in this scenario
- The decrease in demand leads to a lower equilibrium quantity of online music sold.
- The effect on equilibrium price can vary depending on the magnitude of shifts, but generally, a leftward shift in demand with unchanged supply results in a decrease in both equilibrium price and quantity. However, some sources indicate ambiguity in price change depending on other factors
Summary:
Market Factor| Expected Change
---|---
Demand for online music| Decreases (shift left)
Supply of online music| Remains unchanged
Equilibrium price| Decreases (generally)
Equilibrium quantity sold| Decreases
This reflects that with less wealth and confidence, consumers buy less online music, reducing demand and sales volume, while supply remains stable
