Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 4, Problem 1P
To determine
Effect on the
Concept Introduction:
Demand curve shows all the possible combinations of price and quantity demanded of the good at a given time period.
Supply curve shows all the possible combinations of price and quantity supplied of the good at a given time period.
Expert Solution & Answer
Explanation of Solution
- a. Due to the new cure of lung cancer, the smoker will demand more cigarettes because there is a cure of the lung cancer now. This will shift the demand curve to the right.
- b. Due to the increase in the price of cigars, the demand curve of the cigarettes will shift to the right because cigars are the substitute of the cigarettes.
- c. Due to the increase in the wage, the demand curve of the cigarettes will shift to the right because people now have more money to spend.
- d. Due to the discovery of the new fertilizer, the supply curve of the cigarettes will shift to the right because of the increase in the productivity.
- e. Due to the increase in the price of matches or lighter, the demand curve will shift to the left because matches or lighter and cigarettes are complementary goods.
- f. Due to the new laws which restricts the smoking in public places, the demand curve of the cigarettes will shift to the left because everybody has to respect the law.
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Part 4: Analysis question
The graph below shows the demand and supply in the market for cell phones.
For each of the following events, draw a diagram of the new market outcome and say whether the equilibrium price will increase or decrease.
(i) Improvements in the production of LCD screens increase efficiency and reduce costs.
(ii) The Canadian government decides to cut the number of cell phone service providers.
(iii) Consumers find that tablets are inferior to cell phones.
(iv) A research study finds that too much exposure to cell phone may lead to certain types of
cancers.
Question:
Consider a market for Ice Cream an inferior good in Pakistan. For each of the given events, identify which of the determinants of the demand or supply are affected. Also indicate whether demand or supply increase or decreases. Then draw a diagram to show the effect on the price and quantity of Ice Cream.
1) News reports claim that the consumption of Ice Cream is good for the health of coronavirus patients.
2) There has been a decline in wages of all employees in Pakistan due to the third wave of coronavirus.
3) People in Pakistan decide to have more children.
4) Students of NED University develop new automated machinery for the production of Ice Cream.
5. There has been a decrease in people’s income due to COVID-19 crisis.
(1. identify which of the determinants of the demand or supply are affected. Also indicate whether demand or supply increase or decreases of each.
2. Then draw a diagram to show the effect on the price and quantity of Ice Cream of each.)
Question 30
What would happen to the equilibrium price and quantity of shirts if the price of
cotton decreases and all else is held constant?
The price falls and the quantity falls.
The price falls and the quantity remains constant.
The price rises and the quantity falls.
The price rises and the quantity rises.
The price falls and the quantity rises.
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