HW 1.parIII. Supply and Demand Changes (be sure to label the axis on all of your graphs)a) Suppose that you do a national survey of Americans, asking them how they feel aboutAmerican-made cars versus Japanese-made cars. Suppose as well that you discover thatAmericans' "taste" for American-made cars has decreased and the taste for Japanese-made cars has increased. Using the demand and supply model, show how this change intaste for American-made cars will impact the market for American-made cars. Give yourpredictions for the change in the equilibrium price and the equilibrium quantity ofAmerican-made cars bought and soldb) Suppose that you have information indicating that the price of steel (an important inputof production in the auto industry) has doubled during the past few months. Show howthis economic shock will influence the market for American made cars and give your2predictions for equilibrium price and sales change.c) Suppose both (a and b above) of these shocks are occurring simultaneously. Now whatwould be your prediction for equilibrium price and sales change in the American carmarket?dSuppose Congress approves a proposed "temporary worker" program and American firmsfind out that they are able to hire workers while paying lower wages. This happens becauseworkers become 'less scarce'. How would this economic shock impact the market forlettuce?e) Scientific reports have shown that iceberg lettuce (much of it grown in California) showhigh levels of contamination from rocket fuel. California farmers use the Colorado Riverfor irrigation of their fields and the water of the Colorado River is contaminated fromproduction on sites used by several defense contractors. How would this economic shockimpact the market for lettuce?f) Suppose both shocks (d and e above) occur simultaneously. Now what would be yourpredictions for equilibrium price and sales change?g) There are four possible ways that demand and supply can simultaneously shift in a marketThese ways are listed below. For each case, draw two demand and supply graphs andshow the demand change on the first graph and the supply change on the second graphOn each graph, indicate the direction of the change in P* and Q*. Finally, in each case,give your prediction for the overall net impactdemand and the supply change simultaneouslySimultaneous Increase in Demand and Increase in SupplySimultaneous Decrease in Demand and Decrease in SupplySimultaneous Increase in Demand and Decrease in SupplySimultaneous Decrease in Demand and Increase in Supplyon P* and Q for the market when both theIV. Price ControlQuantity DemandedQuantity SuppliedPrice Per Bushel(dollars)336,000030,0002,0006925,0005,000

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Asked Sep 24, 2019
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Question 3 D-G I don’t see how this relatedness to previous questions. How does Thisbe relate and how do I graph it 

HW 1.par
III. Supply and Demand Changes (be sure to label the axis on all of your graphs)
a) Suppose that you do a national survey of Americans, asking them how they feel about
American-made cars versus Japanese-made cars. Suppose as well that you discover that
Americans' "taste" for American-made cars has decreased and the taste for Japanese-
made cars has increased. Using the demand and supply model, show how this change in
taste for American-made cars will impact the market for American-made cars. Give your
predictions for the change in the equilibrium price and the equilibrium quantity of
American-made cars bought and sold
b) Suppose that you have information indicating that the price of steel (an important input
of production in the auto industry) has doubled during the past few months. Show how
this economic shock will influence the market for American made cars and give your
2
predictions for equilibrium price and sales change.
c) Suppose both (a and b above) of these shocks are occurring simultaneously. Now what
would be your prediction for equilibrium price and sales change in the American car
market?
d
Suppose Congress approves a proposed "temporary worker" program and American firms
find out that they are able to hire workers while paying lower wages. This happens because
workers become 'less scarce'. How would this economic shock impact the market for
lettuce?
e) Scientific reports have shown that iceberg lettuce (much of it grown in California) show
high levels of contamination from rocket fuel. California farmers use the Colorado River
for irrigation of their fields and the water of the Colorado River is contaminated from
production on sites used by several defense contractors. How would this economic shock
impact the market for lettuce?
f) Suppose both shocks (d and e above) occur simultaneously. Now what would be your
predictions for equilibrium price and sales change?
g) There are four possible ways that demand and supply can simultaneously shift in a market
These ways are listed below. For each case, draw two demand and supply graphs and
show the demand change on the first graph and the supply change on the second graph
On each graph, indicate the direction of the change in P* and Q*. Finally, in each case,
give your prediction for the overall net impact
demand and the supply change simultaneously
Simultaneous Increase in Demand and Increase in Supply
Simultaneous Decrease in Demand and Decrease in Supply
Simultaneous Increase in Demand and Decrease in Supply
Simultaneous Decrease in Demand and Increase in Supply
on P* and Q for the market when both the
IV. Price Control
Quantity DemandedQuantity Supplied
Price Per Bushel
(dollars)
3
36,000
0
30,000
2,000
6
9
25,000
5,000
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HW 1.par III. Supply and Demand Changes (be sure to label the axis on all of your graphs) a) Suppose that you do a national survey of Americans, asking them how they feel about American-made cars versus Japanese-made cars. Suppose as well that you discover that Americans' "taste" for American-made cars has decreased and the taste for Japanese- made cars has increased. Using the demand and supply model, show how this change in taste for American-made cars will impact the market for American-made cars. Give your predictions for the change in the equilibrium price and the equilibrium quantity of American-made cars bought and sold b) Suppose that you have information indicating that the price of steel (an important input of production in the auto industry) has doubled during the past few months. Show how this economic shock will influence the market for American made cars and give your 2 predictions for equilibrium price and sales change. c) Suppose both (a and b above) of these shocks are occurring simultaneously. Now what would be your prediction for equilibrium price and sales change in the American car market? d Suppose Congress approves a proposed "temporary worker" program and American firms find out that they are able to hire workers while paying lower wages. This happens because workers become 'less scarce'. How would this economic shock impact the market for lettuce? e) Scientific reports have shown that iceberg lettuce (much of it grown in California) show high levels of contamination from rocket fuel. California farmers use the Colorado River for irrigation of their fields and the water of the Colorado River is contaminated from production on sites used by several defense contractors. How would this economic shock impact the market for lettuce? f) Suppose both shocks (d and e above) occur simultaneously. Now what would be your predictions for equilibrium price and sales change? g) There are four possible ways that demand and supply can simultaneously shift in a market These ways are listed below. For each case, draw two demand and supply graphs and show the demand change on the first graph and the supply change on the second graph On each graph, indicate the direction of the change in P* and Q*. Finally, in each case, give your prediction for the overall net impact demand and the supply change simultaneously Simultaneous Increase in Demand and Increase in Supply Simultaneous Decrease in Demand and Decrease in Supply Simultaneous Increase in Demand and Decrease in Supply Simultaneous Decrease in Demand and Increase in Supply on P* and Q for the market when both the IV. Price Control Quantity DemandedQuantity Supplied Price Per Bushel (dollars) 3 36,000 0 30,000 2,000 6 9 25,000 5,000

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Expert Answer

Step 1

d.

The temporary worker program proposed by the US government leads to the increased supply of temporary workers in the US economy from around the world. As a result of this increased supply of labors in the market, the labor becomes less scarce. This means that the supply of labors in the market increases and labor becomes less expensive to produce Lettuce. As a result, the supply curve of Lettuce would shift towards the right while the demand curve remains the same causing a decrease in the equilibrium wage rate of Lettuce while increasing the equilibrium quantity of labor demanded. This can be illustrated as follows:

 

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Price Supply Supply 2 E P P2 Demand Q2 Demand t

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Step 2

e.
The water contamination in the California River causes the Lettuce to become contaminated. When the item is known to be contaminated, it means that the product will be least preferred by the consumers in the market. As a result, the demand curve for the Lettuce in the market will decrease and these results in the decreased price for the Lettuce in the market along with the lower quantity demanded. This can be illustrated as follows:

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Price Supply E P2 Demand Demand 2 Q2 0 Quantity

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Step 3

f.
When the labor supply increase and the contamination of the Lettuce happen simultaneously, there will be different types of changes in the market demand and supply curves. The final change in the equilibrium market price and quantity for Lettuce will be then determined by the magnitude of shift in the demand and supply curves.
When the supply of labor increase causes more shift than the decrease in the demand curve d...

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