Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Chapter 4, Problem 1P
(a)
To determine
The
(b)
To determine
Price and quantity at equilibrium for Country 1.
(c)
To determine
Market demand and supply curves,
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The following graph shows the market for TV sets in Venezuela. The grey line illustrates the world supply curve of TV sets. Suppose that Venezuela
imposes a quota that limits imports to 300 TV sets.
Use the green points (triangle symbol) to plot the quota-adjusted supply curve on the following graph. (Hint: Make sure you use three points to plot
the curve, which is parallel to the original supply curve, with the last point indicating the upper limit allowed by the graph.) Then, use the black point
(cross symbol) to indicate the new equilibrium point.
PRICE (Dollars per TV set)
600
550
500
450
400
350
300
250
200
150
100
50
0
As a result of the quota, price rises by $
Demand
Supply
SWorld
0 100 200 300 400 500 600 700 800 900 1000
QUANTITY (Number of TV sets)
"
►
Swith quota
+
Ewith quota
and consumer surplus falls by $
(?)
Graphically show how each of the following shifts the supply curve. Also identify which factor of supply is being affected in each case.
What happens to the supply of Spices if the US government withdraws an embargo on imported Spices from Iran?
Scenario 1: Because of a recent international trade agreement, the Indian government reduces the tariff on imported coffee. Do you think a reduction of tariff by the government affect the supply or the demand for coffee? If yes, why do you think so? Which determinant of demand or supply is being affected? How will this change the equilibrium price and quantity of coffee? Explain your reasoning and show the changes graphically.
Scenario 2: Suppose the National Institutes of Health (NIH) publishes a study finding that coffee drinking reduces the probability of getting colon cancer. Do you think this will affect the market for coffee? If yes, why do you think so? Which determinant of demand or supply is being affected? How will this change the equilibrium price and quantity of coffee? Explain your reasoning and show the changes graphically.
Scenario 3: Now, combine both the scenarios. In case if the Indian government reduces the tariff on imported coffee, and the recent study published by…
Chapter 4 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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