Answered: This assignment further explores how…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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d-g please

Transcribed Image Text:1. This assignment further explores how demand and supply shocks effect the equilibrium price in a market. Imagine that the market for acoustic guitars is described by the following demand and supply curves: Qa = A - P Qs = B + SP a. Find the equilibrium price and quantity in the market. b. Form the inverse supply and demand functions and, Interpret the terms A and -B/8. f. Where A > 0, B < 0,8 > 0. C. Explain why the emergence of a market for guitars requires the following: A> -B/8 > 0. d. Interpret the parameter & and, provide examples of when it is low or high. e. Suppose that master guitarist Julian Lage gives a performance that goes viral on YouTube. His amazing virtuosity sparks a massive increase in the demand for guitars. How would this shock be captured by the parameter A. Draw the supply and demand curves before and after the shock and show how the equilibrium changes. Based on your graph what, if anything, can you say about how the equilibrium price and quantity change? Now let's consider the magnitude of the shock. Suppose that B = 5 and A = 10 before Lage's concert and A = 15 after the concert. What is the impact of the shock as captured by the increase in A on the equilibrium price and quantity?. How does your answer depend on the parameter 8? Explain the economic intuition. g. Suppose there is breakdown of supply chains for the rare brand of wood that is used for making high quality guitars. How would this shock be captured by the parameter B. Draw the supply and demand curves before and after the shock and show how the equilibrium changes. Based on your graph what, if anything, can you say about how the equilibrium price and quantity change?

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How would we go about part G? Concerning parameter B, if it is below or equal to 0, sellers would not enter the market, correct? How does this relate to the rare wood supply shock? Please walk me through part G. Thank you very much.

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what about question g？

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