Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Chapter 4, Problem 7DQ
To determine
Illustration of high-price period and low-price period.
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Question 2
In a discussion of tuition rates, a university official argues that the demand for admission is
completely price inelastic. As evidence, she notes that while the university has doubled its
tuition (in real terms) over the past 15 years, neither the number nor quality of students applying
has decreased. Would you accept this argument? Explain briefly. (Hint 1: The official makes
an assertion about the demand for admission, but does she actually observe a demand curve?
What else could be going on? Hint 2: Think about the existence of potential substitutes.)
We know that a change in the price of a product causes a movement along the
demand curve. Suppose consumers believe that prices will be rising in the future.
How will that affect demand for the product in the present? Can you show this
graphically? (Please type your answer about consumer expectation's impact on demand, then upload a picture of your graph)
in the Fall of 2020, international demand for U.S. grains grew, pushing up the prices for grains. Indeed grain prices grew nearly 50% in the last 6 months. Your task as an analyst is to analyze the changes in the market for corn.
Using a graph, depict the changes that took place in the corn market. Clearly show and explain any shifts in demand and/or supply curves. Label any shifted curves as D1 and/or S1. If the curves have not shifted, please explain why.
Clearly show the new market equilibrium. Label the new equilibrium price as P1 and equilibrium quantity as Q1
Chapter 4 Solutions
Economics: Principles & Policy
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- Supply and Demand Problem Set[1] Use the following graph to answer questions 1 through 3: Plot the following Price and Quantity combinations: (4, 8), (1, 2), (5, 10) Is your graph more likely to be a demand curve or a supply curve? Why? Using the equation of a line, and P for price and Q for quantity, what is the algebraic formula of this curve? Use the following graph to answer questions 4 and 5: Plot the following Price and Quantity combinations. Note that the points are given in the format (Quantity, Price).(0, 50), (2, 40), (4, 30), (6, 20), (8, 10) Using the equation of a line, what is the algebraic formula of this demand curve? Use the following information to answer questions 6 through 10: Suppose the equation of the line changes to . Compute the quantity demanded at each indicated price. Price: $50, Quantity: Price: $40, Quantity: Price: $30, Quantity: Price: $20, Quantity: Price: $10, Quantity: Use the following graph to answer questions 11…arrow_forwardConsider the apple-juice market. Demand for apple-juice is given by: P = 66 - 4QD and supply of apple-juice is given by: P = 40 + 5Qs- i. What is the equilibrum price of a liter of apple-juice? Give your answer in two decimal places. ii. What is the equilibrum quantity of a liter of apple-juice? Give your answer in two decimal places. Suppose, the current market price for a liter of apple-juice is 62.0 in the market. iii. At this price level, which of the following options best characterize the market of apple-juice? 1 The market clears 2 Shortage in the market 3 Surplus in the market 4 The governmant has imposed tax worth around 8 per unit iv. Calculate the size of market surplus/shortage in the market at this price level. Give your answer in two decimal places. Suppose the new demand for apple-juice is: P = 56 - 4QD. vii. Calculate the new equilibrium price of apple-juice. Give your answer in two decimal places. viii. Calculate the new equilibrium quantity of apple-juice. Give your…arrow_forward13. How shifts in demand and supply affect equilibrium Consider the market for pens. Suppose that the number of students with an allergy to pencil erasers increases, causing more students to switch from pencils to pens in school. Moreover, the price of ink, an important input in pen production, has dropped considerably. On the following graph, labeled Scenario 1, indicate the effect these two events have on the demand for and supply of pens. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move curve and it snaps back to its original position, just drag it a little farther.arrow_forward
- Question 2 The equilibrium price of televisions fell significantly in the past month; however the equilibrium quantity remained unchanged. Three individuals provided an explanation for the situation. Which explanation(s) could be correct? Explain your logic. Mark: Demand increased, but supply was totally inelastic. Shawn: Supply increased, but so did demand. Annica: Supply decreased, but demand was totally inelasticarrow_forwardThe following table shows the weekly demand and supply in the market for ice cream in Detroit. dy Tools Price Quantity Demanded Quantity Supplied (Dollars per gallon of ice cream) (Gallons of ice cream) (Gallons of ice cream) 4 2,000 200 Tips 1,600 600 12 1,200 800 Tips 16 800 1,200 20 400 1,800 כ On the following graph, plot the demand for ice cream ușing the blue point (circle symbol). Next, plot the supply of ice cream using the orange point (square symbol). Finally, use the black point (plus symbol) to indicate the equilibrium price and quantity in the market for ice cream. g Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. 24 Demand 20 16 Supply 12 MacBook Air per gallon of ice cream)arrow_forwardUsing a supply and demand graph (one for each part), illustrate and explain the effect of an outward shift in the normal downward sloping demand curve (increase in demand) on equilibrium price and equilibrium quantity. (a) The supply curve is horizontal. (b) The supply curve is vertical. *Please actually draw the graph and show what it would look likearrow_forward
- Demand 1 3 4 5 6 8 10 QUANTITY (Millions of pens) Compare both the Scenario 1 and Scenario 2 graphs. Notice that after completing both graphs, you can now see a difference between them that wasn't apparent before the shifts because each graph indicates different magnitudes for the supply and demand shifts in the market for pens. Use the results of your answers on both the Scenario 1 and Scenario 2 graphs to complete the following table. Begin by indicating the overall change in the equilibrium price and quantity after the shift in demand or supply for each shift-magnitude scenario. Then, in the final column, indicate the resulting change in the equilibrium price and quantity when supply and demand shift in the direction you previously indicated on both graphs. If you cannot determine the answer without knowing the magnitude of the shifts, choose Cannot determine. Change in Equilibrium Objects Equilibrium Object Scenario 1 Scenario 2 When Shift Magnitudes Are Unknown Price Quantity True…arrow_forwardThe following table shows the annual demand and supply in the market for shoes in Miami. Price (Dollars per pair of shoes) 20 40 60 80 PRICE (Dollars per pair of shoes) 120 100 20 On the following graph, plot the demand for shoes using the blue point (circle symbol). Next, plot the supply of shoes using the orange point (square symbol). Finally, use the black point (plus symbol) to indicate the equilibrium price and quantity in the market for shoes. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. 0 100 0 Quantity Demanded (Pairs of shoes) 1,100 900 800 200 600 500 400 600 800 QUANTITY (Pairs of shoes) Quantity Supplied (Pairs of shoes) 200 400 500 900 1000 1,200 1200 O Demand Supply Equilibriumarrow_forwardThe price of crude oil has been increasing. The price of a good rises in two cases, when demand rises or when supply falls, or both. It has been given that there has been a growing demand for crude oil for turning into refined petroleum (increase in demand), along with a decline in its production (fall in supply). It implies that both an increase in demand and a decrease in supply is responsible for the price rise. Draw a graph to show the information.arrow_forward
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