Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 11, Problem 5DQ
To determine
The price mechanism related with each of the inefficacies.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
In a market economy, what mechanism
determines the price and quantity of goods.
sold?
A) Government Regulations
B) Supply and Demand
C) Corporate Decision-Making
D) International Trade Agreements
(a) Assume that the markets for sugar cane, rum, and whiskey are initially in equilibrium (i.e., supply equals demand in each case). Assume further that a good harvest impacts the world’s sugar cane crop. Sugar cane is a principal ingredient in rum, but it is not an ingredient in whiskey. Rum and whiskey are substitutes for consumption.
(i) Discuss the impact of the good harvest on each of the three markets.
(ii) Discuss the effect on the markets for each of the three products if the government implements a price restriction in the sugar cane market with the aim of protecting the farmers. How will this impact the revenues for sugar growers, rum producers, and whiskey producers?
(b) Identify a newspaper article that illustrates a market failure in your assigned Caribbean country. Ensure that you provide a screenshot of the article in your submission. NOTE: Only the following market failures should be examined: public good, asymmetric information, positive or negative…
Which of the following statements describes Principle 7: Government can
sometimes improve the market outcomes?
Local government implements curfew between 9 pm to 4 am.
Bangko Sentral ng Pilipinas printing new bank notes in preparation to year end
holidays.
Department of Trade and Industry implements price freeze for essential goods during
pandemic.
Government signs free tertiary education law.
What will happen to the supply and demand curve, equilibrium price and quantity
of boots if price of leather used for making the shoes rises?
supply curve shift rightward; demand curve the same; equilibrium price increases;
equilibrium quantity decreases
supply curve shift rightward; demand curve shifts leftward; equilibrium price
increases; equilibrium quantity decreases
supply curve shift leftward; demand curve the same; equilibrium price increases;
equilibrium quantity decreases
supply curve shift leftward; demand curve shifts leftward; equilibrium price increases;
equilibrium quantity…
Chapter 11 Solutions
Economics: Principles & Policy
Knowledge Booster
Similar questions
- QUESTION ONE 1.1 Using the diagram below, defend the point that a free market will always move from disequilibrium to equilibrium according to demand and supply theory. 1.2 Price P P P₂ Excess supply Excess demand le D Quantity Distinguish between microeconomics and macroeconomics according to economic theory. Provide examples to motivate your answer.arrow_forwardList the first eight assumptions of the free market.arrow_forwardYou have learned that the Law of Supply and Demand determines prices in a free-market system. Using a concrete example, describe how the Law of supply and demand works. (Hint: think about seasonal items or holiday-specific popular items, for instance).arrow_forward
- During natural disasters such as the flooding in Burma one policy choice is to do nothing, i.e. let prices rise and fall according to increases and decreases in supply and demand. A second policy choice is to interfere in the market, regulate prices, and prevent the price of goods such as corrugated steel roofing, gasoline, nails, water, food, etc. from rising. The argument frequently made to justify regulating prices is that owners of scarce goods are taking advantage of people in need----taking advantage of innocent people's misfortunes to steal their money and enrich themselves. This is immoral behaviour and should not be allowed. This second policy usually includes a reliance on government rather than the free market to bring in supplies of scarce goods and distribute them for free or at below market prices to alleviate shortages.arrow_forwardAfter defining a ‘market mechanism’ and the ‘law of supply and demand’, explain how higher education can be affected by market changes, and how economic theory can understand such changes (Duff, 1997).arrow_forwardGenerally speaking, what must occur in order for demand to shift? Supply to shift? How does the concept of the invisible hand help explain how markets reach equilibrium?arrow_forward
- In the basic supply-and-demand model, a buyer only purchases a good when? if the price is lower than it was previously. if the price of the good covers the producers’ costs of production. if the price is less than they are willing to pay. if doing so increases the well-being of society. if they are forced to do so.arrow_forwardHello. Could someone explain to me how demand and supply works in economicsarrow_forwardWhen a market is competitive and functioning properly, economic theory predicts that the market equilibrium will be efficient. However, this may not always be the desired outcome. Market outcomes may be unequal or distorted by market failure. Offer an example of a market where you consider the real-world outcome to be unacceptable. Why is the market outcome unacceptable? How can government policy improve on the market equilibrium? Will this solution create a surplus or shortage in the market according to economic theory? Explain. What effect will this solution have on consumer surplus, producer surplus, social surplus, and deadweight loss? Explain.arrow_forward
- In your own words, explain the function(s) of prices in market economies. If a society did not have prices, what challenges would they face?arrow_forward(a) Assume that the markets for sugar cane, rum and whiskey are initially in equilibrium (i.e., supply equals demand in each case). Assume further that a good harvest impacts the world’s sugar cane crop. Sugar cane is a principal ingredient in rum, but it is not an ingredient in whiskey. Rum and whiskey are substitutes in consumption.(i) Discuss the impact of the good harvest on each of the three markets.(ii) Discuss the effect on the markets for each of the three products if thegovernment implements a price restriction in the sugar cane market with the aim of protecting the farmers. How will this impact the revenues for sugar growers,rum producers and whiskey producers? (b) Identify a newspaper article that illustrates a market failure in Barbados. NOTE: Only the following market failures should be examined: public good,asymmetric information, positive or negative externality.(i) Provide a brief summary of the main points in the article. (Maximum 30 words)(ii)Identify the type of…arrow_forwardAn alternative way of thinking about the forces that cause markets to equlibrate in the real world is to think of markets reallocating the good from low to high valued use. Or to think of how the action of buyers and sellers engaging in mutually beneficial voluntary exchange (market forces) reallocates legal ownership or the physical location of the good from low to high valued used. Consider the demand at a price of $9. Look at the image below. multiple answers may be correct.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Microeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning