Question 1 Report
A technology firm launches a new mobile game. A famous streamer begins recommending it to global consumers, while the price of downloading the game stays the same. The firm can expand its server capacity only after several weeks.
(a) State the factor that is likely to change demand. [1]
(b) Explain why demand for the game is likely to rise. [2]
(c) Analyse one reason why the market price may increase in the short run. [2]
(a) A valid demand factor is celebrity endorsement, advertising, or a change in fashion and tastes. The streamer's recommendation can influence consumers independently of the download price. [1]
(b) The recommendation makes the game better known or more desirable to consumers. As a result, more consumers are willing to buy it at every possible price, so demand rises. [2]
(c) The firm cannot expand server capacity quickly, so supply is constrained in the short run. Increased demand then creates excess demand at the old price, allowing the firm to raise the market price. [2]
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