6. Equilibrium prices and quantities are determined by demand D₁ = 200-2p1 and supply S₁ = 2p1-40 in the market for Good 1 and by D₂ = 240-2p2 and supply S₂ = 2p2-P1-20 in the market for Good 2. a. Provide a diagram showing the equilibrium price and quantity in the market for Good 1 and a second diagram showing the equilibrium price and quantity in the market for Good 2. b. Next month the government will introduce a t = 40 per unit tax in the market for Good 1 (not Good 2). Update your diagrams to show and quantify how prices and quantities will be affected in both markets. C. Illustrate (do not calculate) why the price of Good 2 would increase by more if the demand curve in Market 1 was more elastic.

6. Equilibrium prices and quantities are determined by demand D₁ = 200-2p1 and supply S₁ = 2p1-40 in the market for Good 1 and by D₂ = 240-2p2 and supply S₂ = 2p2-P1-20 in the market for Good 2. a. Provide a diagram showing the equilibrium price and quantity in the market for Good 1 and a second diagram showing the equilibrium price and quantity in the market for Good 2. b. Next month the government will introduce a t = 40 per unit tax in the market for Good 1 (not Good 2). Update your diagrams to show and quantify how prices and quantities will be affected in both markets. C. Illustrate (do not calculate) why the price of Good 2 would increase by more if the demand curve in Market 1 was more elastic.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter4: The Market Forces Of Supply And Demand

Section: Chapter Questions

Problem 8PA

See similar textbooks

Similar questions

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
Explain why the following statement is false: In the goods market, no seller would be willing to sell for less than the equilibrium price.
Explain why the following statement is false: In the goods market, no buyer would be willing to pay more than me equilibrium price.
What is the relationship between quantity Demanded and quantity supplied at equilibrium? What is the relationship when there is a shortage? What is the relationship when them is a surplus?
How can you locate the equilibrium point on a demand and supply graph?
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.
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.
What does a downward-sloping demand curve mean about how buyers in a market will react to a higher price?