Suppose the market for hats is competitive, with many small producers of hats, each of them unable toaffect the market price of hats, and many consumers. And suppose there is an increase in the demandfor hats.(a) How would an increase in demand affect the demand curve and supply curve for hats; and howwould it change the equilibrium price and quantity of hats sold?(b) The Core Economics text observes that "price-taking is no longer a “Nash equilibrium". Whatis a “Nash equilibrium"? And why is price-taking no longer one?(c) When the market is not in equilibrium, it is said that the short side of the market dominates.What does this mean?(d) What are "economic rents"? How does "rent seeking" enter the process of price adjustment?(e)In what ways might the market for hats differ from "the labour market"?

Since the question you have posted consists of multiple parts, we will answer the first three parts…

Suppose the market for hats is competitive, with many small producers of hats, each of them unable to affect the market price of hats, and many consumers. And suppose there is an increase in the demand for hats.

Suppose the market for hats is competitive, with many small producers of hats, each of them unable to affect the market price of hats, and many consumers. And suppose there is an increase in the demand for hats.

Macroeconomics

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ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter5: Supply, Demand, And Price: Applications

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Question

Suppose the market for hats is competitive, with many small producers of hats, each of them unable to
affect the market price of hats, and many consumers. And suppose there is an increase in the demand
for hats.
(a) How would an increase in demand affect the demand curve and supply curve for hats; and how
would it change the equilibrium price and quantity of hats sold?
(b) The Core Economics text observes that "price-taking is no longer a “Nash equilibrium". What
is a “Nash equilibrium"? And why is price-taking no longer one?
(c) When the market is not in equilibrium, it is said that the short side of the market dominates.
What does this mean?
(d) What are "economic rents"? How does "rent seeking" enter the process of price adjustment?
(e)
In what ways might the market for hats differ from "the labour market"?

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