Microeconomics for Information Economics and Policy-myassignmenthelp

Question: Discuss about theMicroeconomics for Information Economics and Policy. Answer: Issues: Through peer-to-peer (P2P) networking technology, people distribute and share digital media under the process of peer-to-peer file sharing. In recent years, this sharing technology has earned huge debates from different economical perspectives. According to some economists, this process is economically significant as customers are paying money for purchasing music albums through online. However, economical impact regarding copyright violation within a music industry through peer-to-peer file sharing has remained controversial (Askin and Mol 2018). Moreover, economists have also faced difficulties to determine impact of this file sharing on the revenue of music companies. Based on some unofficial studies, it can be said that file sharing has adversely affected this concerned industry by selling records in an illegal way with a comparatively lower costs (Oberholzer-Gee and Strumpf 2016). Moreover, for this technology, music industry has faced difficulties to analyse any trend related t o its demand and supply, for instance, the trend for purchasing a particular form of music through legal sites cannot be determined under the existence of P-to-P technology. In this context, it can also be mentioned that, due to this increasing number of peer-to-peer file sharing technology, many retail music stores have closed their business for inadequate market demand. Analysis: The situation of music industry can be described with the help of some fundamental economical concepts like demand, supply, consumer surplus and producer surplus. According to some research papers based on this issue, it can be said that the demand for music chiefly depends on its price while some other factors can influence this, as well. For instance, other factors like prices of related products, consumers tastes and income can influence the market demand for recorded music significantly (Bacache-Beauvallet, Bourreau and Moreau 2015). However, to measure the impact of P-2-P file sharing technologies on the market for recorded music, some assumptions are needed to consider. Firstly, prices of recorded music have negative relation with the number of C.D purchase. Secondly, prices of CD have a positive relation with the demand for downloaded music through illegal P-to-P market sharing. Hence, CD and illegally downloaded music can be said as substitute products. Thirdly, prices of ill egal music are low compare to the prices for recorded one. Last but not the least, demand for illegal music have increased because people want to listen this freely before purchasing it from market. Moreover, some people only prefer to listen to music by downloading it from online sites. Those assumptions are drawn from the ethical arguments related to the music industry (Leung 2015). On the other side, due to lack of demand for recorded music, many stores have stopped selling CD, which in turn has decreased the supply of this recorded music within the market. Consequently, prices for those products have increased. On the other hand, consumers have successfully received ample amount of music with very limited price or even freely. This in turn has helped these P-to-P file sharing services to increase its demand. In this context, the concept of consumer surplus along with producer surplus can be described. Consumer surplus measures the difference between price that a consumer wants to pay for consuming the product and price that the concerned person is actually paying, which is, market price (Waldfogel 2017). On the other side, producer surplus measures the difference between price at which the person intends to supply it and the market price at which the supplier is actually supplying it to the customers. As consumer can receive music albums with comparatively cheaper prices through file sharing technology, they can receive higher amount consumer surplus. On the contrary, producers can experience loss within producer surplus due this lower price (Aguiar and Martens 2016). Those economical phenomena can be described with the help of suitable diagrams. Position: Diagrammatical representations can help to support the above mentioned situation appropriately. Figure 1: Demand and supply curve of illegal music and recorded music Source: (created by author) The figure 1 has represented demand and supply curves for both illegal music markets and recorded music markets. Through P-to-P file sharing, supply of music has increased significantly and this in turn has helped the price of illegal music to decrease further. Consequently, market equilibrium for this product has increased from Q0 to Q1 while price has decreased by P0 P1 (Handke, Balazs and Vallb 2016). On the other side, demand for recorded music has decreased by R0R1 unit at the given price P. This happens because at a lower price, people demand more amount of illegal music and this in turn has decreased the demand for its substitute item in the market. The above figure can also determine the amount of consumer surplus and producer surplus. According to this figure, initial amount of consumer surplus is the area of triangle ABP0. However, after fall in price, this amount has become the area of triangle ACP1, which is greater compare to previous one. From this, it can be said that consumers get more amount of surplus. On the other side, producer initial amount of producer surplus is the area of triangle EBP0 and after price change it become the area of triangle FCP1, which is greater compare to the previous one. However, those sellers are related with file sharing market while for actual producers, this amount o surplus has decreased due to higher price and comparatively low demand. Critique: In this context of discussion, some arguments can also occur. For instance, people may use P2P file sharing for listening to the music lower costs. If they like it, then they can buy a recorded version of this music. In addition to this, some customers may find that quality of illegal music is comparatively poor compare to the recorded one (Danaher et al. 2014). This situation leads the demand for recorded music to increase further. However, those phenomena are not strong enough against the view of increasing demand for illegal music. Shutting down of some music stores are the main example of this argument. References: Aguiar, L. and Martens, B., 2016. Digital music consumption on the internet: evidence from clickstream data.Information Economics and Policy,34, pp.27-43. Askin, N. and Mol, J., 2018. Institutionalizing Authenticity in the Digitized World of Music. InFrontiers of Creative Industries: Exploring Structural and Categorical Dynamics(pp. 159-202). Emerald Publishing Limited. Bacache-Beauvallet, M., Bourreau, M. and Moreau, F., 2015. Piracy and creation: The case of the music industry.European Journal of Law and Economics,39(2), pp.245-262. Danaher, B., Smith, M.D., Telang, R. and Chen, S., 2014. The effect of graduated response anti?piracy laws on music sales: evidence from an event study in France.The Journal of Industrial Economics,62(3), pp.541-553. Handke, C., Balazs, B. and Vallb, J.J., 2016. Going means trouble and staying makes it double: the value of licensing recorded music online.Journal of Cultural Economics,40(3), pp.227-259. Leung, T.C., 2015. Music piracy: Bad for record sales but good for the iPod?.Information Economics and Policy,31, pp.1-12. Oberholzer-Gee, F. and Strumpf, K., 2016. The effect of file sharing on record sales, revisited.Information Economics and Policy,37, pp.61-66. Waldfogel, J., 2017. How Digitization Has Created a Golden Age of Music, Movies, Books, and Television.Journal of Economic Perspectives,31(3), pp.195-214.