ECON MICRO
5th Edition
ISBN: 9781337000536
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 4, Problem 6.12P
To determine
The market
Concept Introduction
Market equilibrium- The price and output combination where the quantity demanded equals the quantity supplied is known as the market equilibrium. Graphically it is the point of interaction of the
Market clearing price- The price at the market equilibrium is known as the market clearing price as any shortage or surplus existent at other prices are cleared or eliminated at this price.
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Students have asked these similar questions
1. What is the definition of quantity demanded? What is the definition of quantity supplied?
(a) At what point in a market determines the equilibrium price and quantity. Provide a
graph of a market in equilibrium. Explain why the equilibrium outcome will occur in
a competitive market with no outside intervention (From the government or another
source).
Assume gasoline is sold in a competitive market, the equilibrium price is $50 per barrel, and the equilibrium quantity is 1000 barrels.
(a) Using the numerical values above, draw a correctly labeled graph of the gasoline market and show each of the following.
(i) The equilibrium price
(ii) The equilibrium quantity
(b) At a price of $40 per barrel, will there be a surplus or a shortage in the market? Explain.
(c) Assume new oil wells are discovered. On your graph from part (a), show how this change will affect the equilibrium price and quantity in the market for gasoline.
(d) Assume instead there is an increase in the price of gasoline-operated automobiles. How will this change affect the market for gasoline? Explain.
(e) If both changes in part (c) and part (d) occurred simultaneously, what will happen to the equilibrium price and quantity of gasoline?
Assume gadgets are sold in a competitive market, the equilibrium price is $6, and the equilibrium quantity is 500 units.
(a) Using the numerical values above, draw a correctly labeled graph of the market for gadgets and show each of the following.
(i) The equilibrium price
(ii) The equilibrium quantity
(b) At a price of $8 per unit, will there be a surplus or a shortage in the market? Explain.
(c) Assume gadgets now become more popular. On your graph in part (a), show the effect of the increase in gadgets' popularity on the equilibrium price and quantity of gadgets.
(d) Assume instead there is an increase in the price of tin, a major input in producing gadgets. What will be the effect of an increase in the price of tin on the market for gadgets?
(e) If both changes in part (c) and part (d) occurred simultaneously, will the equilibrium quantity of gadgets increase, decrease, remain unchanged, or be indeterminate? Explain.
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