Question

5:16 1 < Back Assignment Details Microeconomics We did not discuss market equilibrium and changes in market equilibrium yet. So, for this assignment read the section LO3.5 "Changes in Supply, Demand, and Equilibrium" in chapter 3 on pages 58- 59 and answer to the best of your ability the questions below. On paper assignments grades are based on effort. The video below is also helpful:Shifting Demand and Supply-Macro Topic 1.6 (Micro Topic 2.7) On 4 separate graphs, show what happens to market equilibrium price and quantity when: 1-Demand increases 2-Demand decreases 3-Supply increases 4-Supply decreases In each of the 4 cases: a-Name the product (or good) and provide a story as to why demand or supply changed. (For example: the good could be flowers and the story is Valentine's day is approaching which causes the demand for flowers to increase: the demand determinant tastes changed). b-Trace the effect on equilibrium price and quantity. Provide a clearly labeled graph showing 1) the initial equilibrium, 2) the shift in the relevant curve and 3) the new equilibrium that results. Dashboard Calendar To Do Notifications inbox

Answer 1

1) Demand increases and the demand curve shifts to the right.. Equilibrium price and quantity increases..P1 is the new equilibrium price and Q1 is the new equilibrium quantity.E1 is the new equilibrium point.

2) Demand decreases and the demand curve shifts to the left..Equilibrium price falls and equilibrium quantity shifts to the left.P1 is the new equilibrium price and Q1 is the new equilibrium quantity.

3)When supply increases ,supply curve shifts to the right.Price falls and quantity supplied increases. P1 is the new price and Q1 is the new quantity.

4)When supply decreases , supply cutve shifts to the left,price rises and quantity falls.

a) The product is expensive long coats .Demand for expensive long coats increases in winter because of extreme cold and because consumers tastes and preferences has changed towards expensive long coats .

b)1)Initial equilibrium is at E, price is P and quantity is Q.

2)Demand curve shifts to the right and D1 D1 is the new demand curve.

3)Equilibrium is in E1, price rises to P1,Quantity increases to Q1.
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