8. Shifts in supply or demand IThe following graph shows the market for donuts in Chicago, where there are over 1.000 donut shops at any given moment. Suppose the municipalgovernment, in an attempt to attract new residents, issues $1,000 move-in vouchers to each new household that moves to Chicago. As a result, manynew families move into the city.Show the effect of this change on the market for donuts by shifting one or both of the curves on the following graph, holding all else constant.Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps backto its original position, just drag it a little farther.SupplyDemandSupplyDemandQUANTITY (Donuts)Now suppose Congress passes a new tax that decreases the income of Chicago residents.If donuts are a normal good, this will cause the demand for donuts to increasePRICE (Dollars per donut)

Answered: 8. Shifts in supply or demand I The…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter3: Demand And Supply

Section: Chapter Questions

Problem 55P: Table 3.9 illustrates the markets demand and supply for cheddar cheese. Graph the data and find the...

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8. Shifts in supply or demand I
The following graph shows the market for donuts in Chicago, where there are over 1.000 donut shops at any given moment. Suppose the municipal
government, in an attempt to attract new residents, issues $1,000 move-in vouchers to each new household that moves to Chicago. As a result, many
new families move into the city.
Show the effect of this change on the market for donuts by shifting one or both of the curves on the following graph, holding all else constant.
Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back
to its original position, just drag it a little farther.
Supply
Demand
Supply
Demand
QUANTITY (Donuts)
Now suppose Congress passes a new tax that decreases the income of Chicago residents.
If donuts are a normal good, this will cause the demand for donuts to increase
PRICE (Dollars per donut)

Expert Solution

Step 1

Answer:

If the government issues a $1,000 move-in-vouchers then more people will come to Chicago. Since they will get a $1,000 voucher they will increase the demand for donuts and the demand curve of donuts will shift to the right.

There will be no change in the supply curve.

Graphical presentation:

According to the above figure, the demand curve shifts to the right. As a result, the new equilibrium occurs at point E. The equilibrium price of donuts rises and the quantity also rises.

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