Question

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Y brow with Add Pen Draw with Trackpad 8. Market: Snow Globes Scenario: A new machine cuts the production of glitter snow in half. Graph: Supply or Demand: Supply Shifter: Resource/Input: Costs and Availability Increase or Decrease: Increase Price: Quantity: Down

Answer 1

In each graph, D0 and S0 are initial demand and supply curves intersecting at point A with equilibrium price P0 and quantity Q0.

(8)

The new machine will increase productivity. Higher productivity will increase supply, shifting supply curve rightward, decreasing price and increasing quantity.

In following graph, S0 shifts right to S1, intersecting D0 at point B with lower price P1 and higher quantity Q1.

Graph: PO P1 QO Q1 Supply or Demand:

(9)

The tax on less fuel-efficient cars will decrease the production of such vehicles, which will decrease supply, shifting supply curve leftward, increasing price and decreasing quantity.

In following graph, S0 shifts left to S1, intersecting D0 at point B with higher price P1 and lower quantity Q1.

Graph: Q1 QO Supply or Demand: