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no.1.2 and 1.3 (15 Marks) 1.2 Network externality is an economics .pdf

no.1.2 and 1.3 (15 Marks) 1.2 Network externality is an economics term that describes how the demand for a product is dependent on the demand of others buying that product. In other words, the buying patterns of consumers are influenced by others purchasing a product. With the aid of diagram/s distinguish between positive and negative network externality and give a real-life example of each. (15 Marks) 1.3 A price change is known to cause both income and substitution effect. Suppose you are given equation Px X+PyY= 1. If we assume that good X is a normal good and its price decreases while good Y and I remains constant. Carefully choose a diagram and explain the income and substitution effect. (20 Marks) The end 3 | Page.

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no.1.2 and 1.3 (15 Marks) 1.2 Network externality is an economics term that describes how the
demand for a product is dependent on the demand of others buying that product. In other words,
the buying patterns of consumers are influenced by others purchasing a product. With the aid of
diagram/s distinguish between positive and negative network externality and give a real-life
example of each. (15 Marks) 1.3 A price change is known to cause both income and substitution
effect. Suppose you are given equation Px X+PyY= 1. If we assume that good X is a normal
good and its price decreases while good Y and I remains constant. Carefully choose a diagram
and explain the income and substitution effect. (20 Marks) The end 3 | Page

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