1. End the previous 30 years, technological advances have decreased the cost of computer chips. Exactly how do you think this has impacted the market for computers? For computer software? for typewriters? highlight your answer with graphs.

You are watching: A recent study found that the demand and supply schedules for flying disks are as follows:

Technological developments that reduce the price of producing computer chips represent a decrease in an entry price for producing a computer. The an outcome is a change to the ideal in the supply of computers, as displayed in Figure. The equilibrium price falls and also the equilibrium amount rises, as the number shows.

Because computer system software is a complement to computers, the reduced equilibrium price of computer systems increases the demand for software. Together Figure below shows, the result is a climb in both the equilibrium price and also quantity the software.

Because typewriters room substitutes for computers, the lower equilibrium price of computer systems reduces the need for typewriters. Together Figure listed below shows, the result is a decrease in both the equilibrium price and quantity the typewriters.

2. Utilizing supply-and-demand diagrams, show the result of the following events on the sector for sweatshirts. Yes, I desire graphs.

a.A hurricane in southern Carolina loss the cotton crop.

b.The price of animal leather jacket falls.

c.All colleges need morning exercise in appropriate attire.

d.New knitting devices are invented.

a. As soon as a hurricane in south Carolina loss the noodle crop, the raises input price for creating sweatshirts. Together a result, the it is provided of sweatshirts move to the left, as presented in Figure. The brand-new equilibrium price is greater and the new equilibrium quantity of sweatshirts is lower.

b.A decrease in the price of animal leather jackets leads much more people come buy animal leather jackets, reducing the demand for sweatshirts. The result, presented in Figure, is a decrease in both the equilibrium price and also quantity of sweatshirts.

c.The effects of colleges requiring college student to interact in morning practice in appropriate attire raises the need for sweatshirts, as shown in Figure. The result is boost in both the equilibrium price and quantity of sweatshirts.

d.The invention of new knitting machines increases the it is provided of sweatshirts. As number shows, the result is a palliation in the equilibrium price and an increase in the equilibrium quantity of sweatshirts.

3. The market for pizza has the complying with demand and also supply schedules:

Price

Quantity Demanded

Quantity Supplied

$4

135 pizzas

26 pizzas

5

104

53

6

81

81

7

68

98

8

53

110

9

39

121

a.Graph the demand and supply curves. What is the equilibrium price and also quantity in this market? Why correctly! Graph file would make it watch professional.

b.If the really price in the market wereabove the equilibrium price, what would drive the market toward equilibrium?

c.If the actual price in this sector werebelow the equilibrium price, what would drive the sector toward the equilibrium?

Quantity supplied equals quantity demanded in ~ a price the $6 and also quantity the 81 pizzas. If the price were better than $6, quantity supplied would exceed quantity demanded, so providers would mitigate the price to obtain sales. If the price were less than $6, amount demanded would exceed quantity supplied, so suppliers can raise the price without losing sales. In both cases, the price would continue to change until it got to $6, the just price at which there is neither a excess nor a shortage.

4. Due to the fact that bagels and cream cheese are often eaten together, they are complements. Again, graphs.

a.We observe that both the equilibrium price the cream cheese and also the equilibrium amount of bagels have risen. What could be responsible because that this pattern- a autumn in the price of flour or a fall in the price of milk? Illustrate and also explain her answer.

b.Suppose instead that the equilibrium price that cream cheese has actually risen but the equilibrium quantity of bagel has fallen. What could be responsible because that this pattern- a rise in the price that flour or a increase in the price that milk? Illustrate and also explain your answer.

a.Because flour is an ingredient in bagels, a decrease in the price of flour would shift the it is provided curve because that bagels to the right. The result, shown in Figure, would certainly be a fall in the price of bagels and a climb in the equilibrium amount of bagels.

Because cream cheese is a match to bagels, the loss in the equilibrium price that bagels boosts the demand for cream cheese, as presented in number below. The an outcome is a climb in both the equilibrium price and quantity that cream cheese. So, a autumn in the price that flour without doubt raises both the equilibrium price that cream cheese and the equilibrium amount of bagels.

What happens if the price that milk falls? because milk is an ingredient in cream cheese, the loss in the price the milk leads to an increase in the it is provided of cream cheese. This leads to a to decrease in the price the cream cheese, quite than a increase in the price of cream cheese. For this reason a fall in the price the milk could not have been responsible because that the sample observed.

b.In component (a), we found that a loss in the price of flour brought about a climb in the price the cream cheese and a climb in the equilibrium amount of bagels. If the price the flour rose, the opposite would certainly be true; the would result in a fall in the price that cream cheese and also a fall in the equilibrium amount of bagels. Due to the fact that the inquiry says the equilibrium price that cream cheese has actually risen, it could not have actually been resulted in by a rise in the price of flour.

What happens if the price the milk rises? From part (a), we discovered that a autumn in the price the milk led to a decline in the price that cream cheese, therefore a rise in the price the milk would cause a increase in the price the cream cheese. Since bagels and also cream cheese space complements, the increase in the price of cream cheese would alleviate the demand for bagels, as Figure listed below shows. The result is a decline in the equilibrium quantity of bagels. So a climb in the price the milk does cause both a increase in the price that cream cheese and a decline in the equilibrium quantity of bagels.

5. Intend that the price of basketball ticket at your college is figured out by market forces. Currently, the demand and supply schedules are as follows:

Price

Quantity Demanded

Quantity Supplied

$4

10,000 tickets

8,000 tickets

8

8,000

8,000

12

6,000

8,000

16

4,000

8,000

20

2,000

8,000

a.Draw the demand and supply curves. What is unusual around this supply curve? Why might this be true?

b.What are the equilibrium price and quantity that tickets?

c.Your university plans come increase full enrollment next year by 5,000 students. The additional students will have actually the following demand schedule:

Price

Quantity demanded

$4

4,000 tickets

8

3,000

12

2,000

16

1,000

20

0

Now add the old demand schedule and also the demand schedule because that the brand-new students to calculation the brand-new demand schedule because that the whole college. What will be the new equilibrium price and quantity?

a.As Figure below shows, the supply curve is vertical. The consistent quantity offered makes sense because the basketball arena has actually a fixed number of seats at any kind of price.

b.Quantity supplied amounts to quantity demanded at a price that $8. The equilibrium quantity is 8,000 tickets.

c.

Price

Quantity Demanded

Quantity Supplied

$4

14,000

8,000

$8

11,000

8,000

$12

8,000

8,000

$16

5,000

8,000

$20

2,000

8,000

The brand-new equilibrium price will be $12, i beg your pardon equates quantity demanded to quantity supplied. The equilibrium amount remains 8,000 tickets.

6. The government has determined the free-market price that cheese is also low.

a.Suppose the government imposes a binding price floor in the cheese market. Attract a supply-and-demand diagram to present the result of this policy on the price the cheese and quantity the cheese sold. Is over there a shortage or a excess of cheese?

b.Producers that cheese complain that the price floor has decreased their total revenue. Is this possible? Explain.

c.In solution to the cheese producers’ complaints, the federal government agrees to acquisition all the excess cheese at the price floor. Contrasted to the basic price floor, that benefits native this new policy? that loses?

a.The imposition that a binding price floor in the cheese market is shown in number 4. In the lack of the price floor, the price would be P1 and also the quantity would it is in Q1. Through the floor collection at Pf, i beg your pardon is greater than P1, the amount demanded is Q2, while quantity provided is Q3, so over there is a surplus of cheese in the amount Q3 – Q2.

b.The farmers’ complaint that their complete revenue has decreased is exactly if demand is elastic. V elastic demand, the percentage decrease in amount would exceed the percent rise in price, so total revenue would decline.

c.If the government purchases every the surplus cheese in ~ the price floor, producer benefit and taxpayers lose. Producers would develop quantity Q3 the cheese, and also their complete revenue would increase substantially. However, consumers would buy just quantity Q2 of cheese, so they room in the same position as before. Taxpayers lose due to the fact that they would be financing the purchase of the excess cheese through higher taxes.

7. A current study discovered that the demand and supply because that Frisbees space as follows:

Price per Frisbee

Quantity Demanded

Quantity Supplied

$11

1 million Frisbees

15 million Frisbees

10

2

12

9

4

9

8

6

6

7

8

3

6

10

1

a.What room the equilibrium price and also quantity of Frisbees? I always want graphs.

b.Frisbee manufacturers persuade the federal government that Frisbee production enhances scientists’ expertise of aerodynamics and thus is vital for national security. A pertained to Congress votes to impose a price floor the $2 above the equilibrium price. What is the new market price? How numerous Frisbees space sold?

c.Irate college students in march on Washington and demand a palliation in the price of Frisbees. One even more concerned congress votes to repeal the price floor and impose a price ceiling $1 listed below the previous price floor. What is the new market price? How numerous Frisbees space sold?

a. The equilibrium price the Frisbees is $8 and also the equilibrium quantity is six million Frisbees.

b.With a price floor of $10, the brand-new market price is $10 because the price floor is binding. At that price, just two million Frisbees space sold, due to the fact that that is the amount demanded.

c.If there’s a price ceiling the $9, it has actually no effect, since the sector equilibrium price is $8, i m sorry is listed below the ceiling. Therefore the sector price is $8 and the amount sold is 6 million Frisbees.

8. Mean the federal federal government requires beer drinkers to pay a $2 taxes on each situation of beer purchased. (In fact, both federal and state federal governments impose beer count of some sort.)

a.Draw a supply-and-demand diagram of the market for beer there is no the tax. Show the price paid by consumers, the price received by producers and the amount of beer sold. What is the difference between the price payment by consumers and also the price got by producers?

b.Now attract a supply-and-demand diagram for the beer industry with the tax. Display the price paid by consumers, the price obtained by producers and the amount of beer sold. What is the difference between the price payment by consumers and the price got by producers? has the quantity of beer sold boosted or decreased?

a.Figure below shows the sector for beer without the tax. The equilibrium price is P1 and the equilibrium quantity is Q1. The price paid by consumers is the very same as the price got by producers.

b.When the taxation is imposed, it drives a wedge that $2 between supply and demand, as displayed in figure 6. The price paid by consumer is P2, while the price received by producer isP2 ­– $2. The quantity of beer sold declines to Q2.

9.Explain exactly how buyer’s willingness come pay, customer surplus and also the demand curve space related.

The price a buyer is willing to pay,consumer surplus, and also the demand curve are all very closely related. The height of the need curve to represent the willingness to pay of the buyers. Consumer surplus is the area below the demand curve and over the price, which amounts to the price the each the person who lives is ready to salary minus the price actually paid.

10. Describe how seller’s costs, producer surplus, and the it is provided curve room related.

Sellers' costs, producer surplus, and the supply curve are all closely related. The elevation of the supply curve represents the prices of the sellers. Producer excess is the area below the price and above the supply curve, which equals the price got minus each seller's costs of developing the good.

11. In a supply-and-demand diagram, show producer and consumer surplus in the industry equilibrium.

12. What is efficiency? Is that the only goal of financial policymakers?

An allocation of resources is efficient if it maximizes total surplus, the amount of consumer surplus and also producer surplus. Yet efficiency may not it is in the only goal of economic policymakers; they may additionally be concerned around equity¾the fairness of the distribution of well-being.

See more: What Results From An Unequal Sharing Of Electrons Between Atoms

13. Name two species of market failure. Explain why each may reason market outcomes to be inefficient .

Two types of market failure are sector power and also externalities. Industry power may reason market outcomes to be inefficient because firms may cause price and also quantity to different from the levels they would certainly be under perfect competition, which keeps complete surplus from gift maximized. Externalities are side effects that room not taken right into account through buyers and sellers. As a result, the cost-free market does no maximize full surplus.