Question

Consider the market for cable-based Internet access service, which is a normal good. Explain whether the following event would cause an increase or a decrease in demand or an increase or a decrease in the quantity demanded.

a. Firms providing wireless (an alternative to cable) Internet access services reduce their prices.

Answer 1

Answer:

The correct answer is: Decrease in demand.

Explanation:

The difference between changes in quantity demanded and changes in demand rely on the fact that changes in quantity demanded are driven mainly by changes in the price of goods or services while changes in demand reflect changes on consumers' preferences and income.

Thus, a change from wired internet to wireless internet changes depends on consumers' preferences, thus it represents a change in demand. Then, demand for wired internet will decrease since the demand for wireless internet will increase due to lower prices.