Question 3: ( 8 marks)

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

Each event must be represented by a sketch showing the effect on the market.

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

1. Firms providing cable-based Internet access services reduce their prices.

1. There is a decrease in the incomes earned by consumers of cable-based Internet access services.

d. Consumers' tastes shift away from using wireless Internet access in favour of cable-based Internet access services.