192 CHAPTER 8 Utility and Demand
Source of data: Recording Industry Association of America.
REVIEW QUIZ
1 When the price of a good falls and the prices
of other goods and a consumers income
remain the same, explain what happens to the
con- sumption of the good whose price has
fallen
and to the consumption of other goods.
2 Elaborate on your answer to the previous ques-
tion by using demand curves. For which good
does demand change and for which good does
the quantity demanded change?
3 If a consumers income increases and if all
goods are normal goods, explain how the
quan- tity bought of each good changes.
4 What is the paradox of value and how is
the paradox resolved?
5 What are the similarities between utility and
temperature?
You can work these questions in Study
Plan 8.3 and get instant feedback.
Most people buy all their music in digital
form, but many still buy physical CDs and some
people buy both downloads and CDs.
We get utility from the singles and albums that
we buy, and the more songs and albums we have, the
more utility we get. But our marginal utility from
songs and albums decreases as the quantity that we
own increases.
We also get utility from convenience. A song that
we can buy with a mouse click and play with the
spin of a wheel is more convenient both to buy and
to use than a song on a CD. The convenience of
songs downloaded over the Internet means that, song
for song, we get more utility from a song
downloaded than we get from a song on a physical
CD.
But most albums are still played at home on a
CD player. So for most people, a physical CD is a
more convenient medium for delivering an album.
Album for album, people on average get more
utility from a CD than from a download.