Consider a market for online movie rentals. The market supply curve slopes upward, the market demand curve slopes downward, and the equilibrium rental price equals $3.50. Consider each of the following events, and discuss the effects they will have on the market clearing price and on the demand curve faced by the individual online rental firm.
a. People’s tastes change in favor of going to see more movies at cinemas with their friends and family members.
b. More online movie-rental firms enter the market.
c. There is a significant increase in the price to consumers of purchasing movies online.