Question

Review_Questions_Chapters_3_4 - Word Tell me what you want to do Acrobat AaBbCcDc AaBbCeD& AaBbC AaBbcc Aab AaBbccc AaBbCeDe AaBbce T Normall 11 No Spac... Heading 1 Heading 2 Title Subtitle Subtle Em... Empha- Styles 4. Predict the impact on equilibrium price and quantity for the relevant markets given the following changes. Analyze graphically labeling all curves clearly and indicating original equilibrium price and quantity and the new equilibrium price and quantity. Draw a separate supply and demand graph for each individual market and change. Please provide a written explanation detailing whether demand and/or supply changed, whether the change was an increase or decrease, and why. A. The birthrate suddenly increases dramatically. What would you expect to happen in the market for baby items? The market for nightclub entertainment? B. What will happen in the market for personal computers if: a Consumers become more familiar with the use and benefits of personal computers b. There is a technological cost-saving breakthrough in the production of personal computers c. Both (a) and (b) happen simultaneously. *****Provide a separate graph for each part**** c. What will happen in the market for personal computers if. a Consumers experience a rise in incomes. b. A subsidy is placed on the production of personal computers c. Both (a) and (b) happen simultaneously. *****Provide a separate graph for each part** D. What will happen in the market for wheat if the cost of producing wheat increases due to higher machine costs and consumers are informed that consumption of wheat products reduces the chance of contracting the flu? E. What happens in the world market for coffee if three-quarters of the Brazilian crop is destroyed by frost? What are the potential effects on the market for tea? F. What will happen in the market for automobiles if the United Auto Workers union bargains for and receives higher wages for auto workers

only question 4

Answer 1

solution : 4 (A) market for baby items: price t- - Xei! ilo De o å, ar Quantity The demand for baby items will increase because more babies are born. Equilibrium price and quantity will i increase. Market for nightclub entertainment: prices a t I/ * az a quantity The demand for nightclub entertaiment will decrease because people spend their time upbringing their new born babies. Equilibrium price and quantity will decrease.

B. Market for personal computers : a. Price . . s i B o a, Q Quantity More familiarity with use and benefits of personal computers will increase demand. Demand curve will shift to right. Equilibrium price and quantity will increase b. b. Price Price , si S2 Pit --- -- V o a Q Quantity A technological breakthrough in the production of personal computer will increase supply because producers cost decreases. At each price, producers will be willing to supply more. Equilibrium price will. decrease whereas equilibriun quantity will increase.

C. price 1.6 pH- - Vez - Q Q Quantity The combined effect of increase in demand and supply is that quantity will increase however price may increase, decrease or remain same. It depends on by how much supply and demand have shifted. If supply shifts more than demand, price will decrease. It supply shifts less than demand, price will increase. It shift in supply is same. equal to that o in demand, price will remain