Principles of Macroeconomics, Student Value Edition (12th Edition)
12th Edition
ISBN: 9780134079530
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 3, Problem 5.9P
Subpart (a):
To determine
Graph the supply and
Subpart (b):
To determine
Calculation of quantity of pizza.
Subpart (c):
To determine
Effect of change in price of pizza on its supply.
Subpart (d):
To determine
Equation for new market demand.
Subpart (e):
To determine
Calculation of
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Assume that the market can be represented by the supply and demand curves: Qs = 6P - 60 Qp = 60 - 4P
1. What is the price in equilibrium?
2. What is the quantity in equilibrium?
Suppose the market demand for shirts is given by Qd = 300 – 20P and the market supply for shirts is given by Qs = 20P – 100, where P = price (per shirt). i. Graph the supply and demand schedules for shirts between price = $5 through to $15 (increase in units of 1, i.e. 5, 6, 7…). ii. Using the equations provided, in equilibrium, how many shirts would be sold and at what price? iii. What would happen if suppliers set the price of shirts at $15? Explain the market adjustment process.
Explain why the following statement is false: “In the goods market, no buyer would be willing to pay more than the equilibrium price.
Chapter 3 Solutions
Principles of Macroeconomics, Student Value Edition (12th Edition)
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Similar questions
- Question 1 Suppose the market demand for pizza is given by Qd = 300 - 20P and the market supply for pizza given by Qs = 20P – 100 Graph the supply and demand for pizza using $5 through $15 as the value of P. In equilibrium, how many pizzas would be sold, and at what price? What would happen if suppliers set the price of pizza at $15? Explain the market adjustment process. Suppose the price of hamburgers, a substitute for pizza, doubles. This leads to a doubling of the demand for pizza (at each price consumers demand twice as much pizza as before). Write the equation of the new market demand for pizza. Find the new equilibrium price and quantity for pizza. If the price of Pizza is $2 what is the elasticity of demand and supply for pizza? Now if the price increases to $5 calculate the demand and supply elasticities.arrow_forward1. The Smith family eats both meat and potatoes on a regular basis and we need to know how the family views these goods. If the price of meats rises and the family eats more potatoes, then the two goods must be a. Substitutes b. Complements c. Inferior d. Normal 2. Which of the following is not a determinant of Supply? a. Prices of resources b. Technology and productivity c. Prices of Complements d. Producers’ expectations e. The number of producers 3. In December, both the price of Christmas trees and the quantity of trees sold rises. Is this a violation of the Law of Demand? Explain your answer 4. Explain the following statement in terms of Supply and Demand: “When a war breaks out in the Middle East, the price of gasoline rises and the price of a used Cadillac falls”.arrow_forwardWhat happens in the market for bagels if the price of cream cheese increases? Assume that bagels and cream cheese are complementary goods. Question 34 options: A) Both the equilibrium price and equilibrium quantity of bagels fall B) Both the equilibrium price and equilibrium quantity of bagels increase. C) The equilibrium price increases and the equilibrium quantity decreases in the market for bagels D) The equilibrium price decreases and the equilibrium quantity increases in the market for bagels.arrow_forward
- Explain why the following statement is false: “In the goods market, no buyer would be willing to pay more than the equilibrium price.” We know that a change in the price of a product causes a movement along the demand curve. Suppose consumers believe that prices will be rising in the future. How will that affect demand for the product in the present? Can you show this graphically?arrow_forwardA market consists of groups of buyers and sellers of a good or service. Market equilibrium represents the price at which the quantity of goods supplied is balanced with the number of goods consumers are willing and able to buy. Consider the market for coffee: Assume first that there is a heatwave that damages a large portion of coffee beans. Describe how this would affect equilibrium in the market for coffee. Specifically, does demand or supply shift, in which direction, and what is the effect on equilibrium price and quantity? Last, extend your analysis to the long run, a period of time long enough for new coffee growers to enter the market or for existing growers to exit the market. How might equilibrium price and quantity in the market for coffee be affected when enough time is allowed for a change in the number of sellers in the market?arrow_forwardIn the below figure, a consumer is initially in equilibrium at point C. The consumer’s income is $400, and the budget line through point C is given by $400 = $100X + $200Y. When the consumer is given a $100 gift certificate that is good only at store X, she moves to a new equilibrium at point D. a. Determine the prices of goods X and Y.Price of X: $ Price of Y: $ b. How many units of product Y could be purchased at point A?c. How many units of product X could be purchased at point E?d. How many units of product X could be purchased at point B?e. How many units of product X could be purchased at point F?f. Based on this consumer’s preferences, rank bundles A, B, C, and D in order from most preferred to least preferred. (Click to select) D, B, C, A D, C, A, B C, A, B, D A, B, C, D g. Is product X a normal or an inferior good? (Click to select) Normal Inferiorarrow_forward
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