Principles of Macroeconomics, Student Value Edition (12th Edition)
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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Chapter 4, Problem 1.9P
To determine

To show the changes in price and demand-supply equilibrium using a graph.

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Suppose that in 2007 Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. From these statements what changes in supply or demand on the market for Mustangs produced such changes in equilibrium? (One graph. Start by plotting two points (price versus quantity, shift either supply or demand, not both) and then draw supply and demand graphs through them in a way that explains the change in the equilibrium from 2007 to 2008.
How would the equilibrium quantity and price of smartphones be altered if the prices of their electronic components increase, and labor costs to produce them rise, while alternative communication methods become more accessible and user-friendly?    (A) Quantity will fall, and the effect on price is ambiguous.    (B) Price will fall, and the effect on quantity is ambiguous.    (C) Quantity will rise, and the effect on price is ambiguous.    (D) Price will rise, and the effect on quantity is ambiguous.
Suppose the National Institutes of Health publishes a study finding that coffee drinking increases the probability of getting colon cancer. How do you imagine this will affect the market for coffee? Why? Which determinant of demand or supply is being affected? Show graphically with before- and after-curves on the same axes. How will this change the equilibrium price and quantity of coffee? Explain your reasoning.
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