Which effect describes an increase in demand for a product because more people are using or adopting the product?

• A. Income effect
• B. Network effect
• C. Price effect
• D. Substitution effect

Answer: (B)

Verified step by step guidance

1. Understand the question is asking about the phenomenon where the demand for a product increases as more people use or adopt it.
2. Recall the definitions of the given effects: the Income effect relates to changes in purchasing power, the Price effect relates to changes in quantity demanded due to price changes, and the Substitution effect involves consumers switching to alternatives when prices change.
3. Identify that the effect where demand increases because more people are using the product is known as the Network effect, which occurs when the value of a product or service increases as more people use it.
4. Recognize that the Network effect is common in products like social media platforms, communication tools, and technologies where user participation adds value.
5. Conclude that the correct answer is the Network effect, as it directly describes the increase in demand driven by more users adopting the product.