Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Chapter 4, Problem 5DQ
To determine
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It is claimed that price floors and price ceilings both reduce the actual quantity exchanged in a market. Use a diagram or diagrams to support this conclusion, and explain the common sense behind it.
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Identify which side of the market for new automobiles is affected (demand or supply), how is it affected (increase or decrease), what happens to equilibrium price and quantity exchanged due to each of the following changes separately. (You don’t need to draw a graph unless it really makes your life easier)
a. Car insurance rates increase.
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c. Price of public transportation increases.
Chapter 4 Solutions
Economics: Principles & Policy
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- Consider each scenario independently. In each of the following cases state, using verbal and graphical analysis Show the correct increase / decrease in the demand or supply Show correct labels Show what will happen to the equilibrium price Show what will happen to the equilibrium quantity Show a brief explanation (a) What will happen in the market for wine if the price of cheese increases (wine and cheese are complements)? (b) What will happen in the market for brewed coffee if the price of coffee beans decreases? (c) What will happen in the market for lobster if the government reduces the income tax and lobsters are a normal good?arrow_forwardThe quantity exchanged in the market will be below the equilibrium quantity whenever the prevailing market price is not equal to equilibrium price. Is this statement true or false? Please include 2 graphs indicating the quantity exchanged in each grapharrow_forwardConsider each scenario independently. In each of the following cases state, using verbal and graphical analysis Show the correct increase / decrease in the demand or supply Show correct labels Show what will happen to the equilibrium price Show what will happen to the equilibrium quantity Show a brief explanation What will happen in the market for tomatoes if a new study is released that shows tomatoes contain antioxidants (may help prevent cancer)? What will happen in the market for corn if a new crop rotation technique is discovered that allows corn to be grown more easily and the price of green beans, a substitute, decreases? What will happen in the market for gasoline if the price of oil increases and there is a vast increase in the population (e.g., another baby boomer generation)?arrow_forward
- Refer to the above diagram for the milk market. There would be a shortage of milk whenever the price is:arrow_forwardUse the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. The equilibrium price in this market is__________________ per teapot, and the equilibrium quantity is__________________ teapots bought and sold per month. Complete the following table by indicating at each price whether there is a shortage or surplus in the market, the amount of that shortage or surplus, and whether this places upward or downward pressure on prices. Price Shortage or Surplus Shortage or Surplus Amount Pressure (Dollars per teapot) (Teapots) 48 Shortage 32arrow_forwardThe widget market is competitive and includes no transaction costs. Five suppliers are willing to sell one widget at the following prices: $20, $12, $8, $4, and $2 (one seller at each price). Five buyers are willing to buy one widget at the following prices: $8, $12, $20, $32, and $44 (one buyer at each price). For each price shown in the following table, use the given information to enter the quantity demanded and quantity supplied. Price Quantity Demanded Quantity Supplied ($ per widget) (widgets) (widgets) $2 $4 $8 $12 $20 $32 $44 In this market, the equilibrium price will be______ per widget, and the equilibrium quantity will be ___ (#) widgets.arrow_forward
- Back to Assignment Attempts: Do No Harm: / 1 10. Market equilibrium The following table shows the monthly demand and supply in the market for shoes in Dallas. Price Quantity Demanded Quantity Supplied (Dollars per pair of shoes) (Pairs of shoes) (Pairs of shoes) 20 1,100 200 40 900 400 60 800 500 80 600 900 100 500 1,200 On the following graph, plot the demand for shoes using the blue point (circle symbol). Next, plot the supply of shoes using the orange point (square symbol). Finally, use the black point (plus symbol) to indicate the equilibrium price and quantity in the market for shoes. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. DemandSupplyEquilibrium020040060080010001200120100806040200PRICE (Dollars per pair of shoes)QUANTITY (Pairs of shoes) Grade It Now Save & Continue Continue without…arrow_forwardIllustrate the following with supply and demand curves: When the corona virus hit Pakistan in February, people rushed to the markets to get masks and sanitizers but they were unable to get them even at a higher price. There was shortage in the market and suppliers were unable to fulfill the sudden increase in demand.arrow_forwardIdentify which side of the market for new automobiles is affected (demand or supply), how is it affected (increase or decrease), what happens to equilibrium price and quantity exchanged due to each of the following changes separately. (You don’t need to draw a graph unless it really makes your life easier f. Consumers expect car prices to rise in the near future. g. Consumers suddenly become more concerned about environment.arrow_forward
- Use Exhibit 1. If the actual price in the market was $16, then aA. shortage of 700 units would exist and price would tend to rise.B. shortage of 450 units would exist and price would tend to rise.C. shortage of 250 units would exist and price would tend to rise.D. surplus of 700 units would exist and price would tend to fall.E. surplus of 250 units would exist and price would tend to fall.arrow_forwardSales for home weight systems have spiked in the last 7 months as more Americans are working out in the safety of their homes than at public gyms. On a piece of scrap paper, follow the four-step process to predict the ultimate change to equilibrium price and quantity (clearly write the results to each step in the process similar to the examples depicted in my recorded lectures).arrow_forwardDuring the last year while the pandemic was impacting our lives. the price of used cars has soared. Assume that the price of used cars is solely determined by supply and demand. Use supply and demand concepts to explain whether each of the following supports an increase in the price of used cars. Explain why each of these would or would not increase the price of used cars. Requesting assistance for questions 4 & 5 only. Due to supply chain issues, the supply of new cars decreased significantly Because of issues related to the pandemic, more people were unwilling to rely on public bus/trains/subways for commuting to work Due to the pandemic, people had extra money since they were not spending money on vacations, going out to eat, etc. Interest rates remained at historically low levels The amount of used cars from repossessions, from rental car companies and from cars coming off leases declined significantlyarrow_forward
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