Answered: US Mkt. for single family homes. The…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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US Mkt. for single family homes. The changes in the price lumber affects supply/demand of single family homes because ______________________________. On the graph: (1) Show the effect of the change in the price of lumber. (2) Show consumer surplus (CS0) and producer surplus (PS0) before the imposition of tariffs; (3) Show consumer surplus (CS1) and producer surplus (PS1) after the imposition of tariffs; (4) With up/down arrows, indicate the changes in equilibrium price___, equilibrium quantity____, consumer surplus_____, producer surplus_______.

In the US market for single-family homes

1. Label clearly the supply and demand curves, S and D. (10%)

2. In the text, indicate clearly what side of the market is affected, supply or demand, by underlining or circling the relevant term. (20%)

3. In the text, indicate clearly by filling in the space provided, the connection between the markets. Why does the change in the price or quantity of one good affect demand or supply of another good (for example, the goods are substitutes in consumption, or one good is an input in the production of the other, etc.) (20%)

4. Once you decided which side of the market is affected and how, show on the graph the new supply or demand curve, labeling them S' or D', and indicate the new equilibrium price and quantity, pe' and qe', consumer and producer surplus before and after the imposition of the tariffs. (30%)

5. In the text, fill-in the blank spaces with upward/downward pointing arrows to indicate what happens with equilibrium price and quantity, consumer surplus and producer surplus. (20%)

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

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