Supply and Demand - End of Chapter Problem Two students are debating the effects of an expected decline in future home prices. Student 1 claims that a decline in home prices will increase the total quantity of homes bought and sold while student 2 claims that the quantity of homes bought and sold will decline. a. Which student is correct? Without knowing the magnitude of the shifts, we cannot tell whether equilibrium quantity increases or decreases. No one is correct. Student 2 is correct. Student 1 is correct. b. What do we know will happen without ambiguity? Supply will decrease once expectations are announced. Demand will increase once expectations are announced. Equilibrium price will decrease. Equilibrium quantity will increase.

Supply and Demand - End of Chapter Problem Two students are debating the effects of an expected decline in future home prices. Student 1 claims that a decline in home prices will increase the total quantity of homes bought and sold while student 2 claims that the quantity of homes bought and sold will decline. a. Which student is correct? Without knowing the magnitude of the shifts, we cannot tell whether equilibrium quantity increases or decreases. No one is correct. Student 2 is correct. Student 1 is correct. b. What do we know will happen without ambiguity? Supply will decrease once expectations are announced. Demand will increase once expectations are announced. Equilibrium price will decrease. Equilibrium quantity will increase.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter4: The Market Forces Of Supply And Demand

Section: Chapter Questions

Problem 10PA

See similar textbooks

Similar questions

As a general rule, is it safe to assume that a change in the price of a good will always have its most significant impact on the quantity demanded of that good, rather than on the quantity demanded of miller goods? Explain.
Suppose there is a soda tax to curb obesity. What should a reduction in the soda tax do to the supply of sodas and to the equilibrium price and quantity? Canyon show this graphically? Hint: Assume that the soda tax is collected from the sellers.
Explain all the reasons why a decrease in a products price would lead to an increase in purchases.
Many changes are affecting the market for oil. Predict how each of the following events will affect the equilibrium price and quantity in the market for oil. In each case, state how the event will affect the supply and demand diagram. Create a sketch of the diagram if necessary. Cars are becoming more fuel efficient, and therefore get more miles to the gallon. The winter is exceptionally cold. A major discovery of new oil is made off the coast of Norway. The economies of some major oil-using nations, like Japan, slow down. A war in the Middle East disrupts oil-pumping schedules. Landlords install additional insulation in buildings. The price of solar energy falls dramatically. Chemical companies invent a new, popular kind of plastic made from oil.
How does a price floor 521 above the equilibrium level affect quantity demanded and quantity1 supplied?
In an analysis of the market for paint, an economist discovers the facts listed below. State whether each of these changes will affect supply or demand, and in what direction. There have recently been some important cost-saving inventions in the technology for making paint. Paint is lasting longer so that property owners need not repaint as often. Because of severe hailstorms, many people need to repaint now. The hailstorms damaged several factories that make paint, forcing them to close down for several months.
When analyzing a market, how do economists deal with the problem that many factors that affect the market are changing at the same time?
Review Figure 3.4. Suppose the price of gasoline is 1.60 per gallon. Is the quantity demanded higher or lower than at the equilibrium price of 1.40 per gallon? What about the quantity supplied? Is there a shortage or a surplus in the market? If so, how much? Figure 3.4 Demand and Supply of Gasoline
What does a downward-sloping demand curve mean about how buyers in a market will react to a higher price?