The concept of 'Network Externalities' implies that:
A. Externalities are always negative
B. The value of a good decreases with the number of users
C. Only production externalities matter
D. The value of a good or service increases with the number of other users
Answer: Option D
Solution (By JKSSB Mock Tests)
Network externalities exist when the utility that a user derives from a good or service depends positively on the number of other users of the same or compatible goods.
Explanation:
Empirical studies often find 'excess sensitivity' of consumption to current income, suggesting that liquidity constraints, myopia or other factors cause departures from pure permanent-income behaviour.
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