EBK PRINCIPLES OF MACROECONOMICS
12th Edition
ISBN: 9780134079592
Author: Oster
Publisher: YUZU
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Chapter 4, Problem 2.2P
Subpart (a):
To determine
To calculate the
Subpart (b):
To determine
Impact of a
Subpart (c):
To determine
The factor which determines the quantity of oil to be purchased.
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The graph below shows domestic supply and demand for coffee in the U.S. Suppose
that at any price, foreign suppliers of coffee will supply 50, 000 pounds.
The "Domestic Supply + Imports" curve is misplaced. Re-position the curve to reflect
the provided information. (Note that quantity is expressed in thousands of pounds
on the graph.)
Provide your answer below:
150
Demand
-100-
Domestic Supply (40,$50)
Domestic Suppty+imports (50,$50
50
50
100
150
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…
“Both the import demand curve and export supply curve of a good are functions of domestic price of the good.” Explain the above statement with the help of graphs.
Chapter 4 Solutions
EBK PRINCIPLES OF MACROECONOMICS
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