The demand and supply functions for sweatshirts (the basic grey kind) are as follows:
Demand Supply
Quantity Quantity
Demanded Supplied
Price (per period) Price (per period)
$10 15,000 $10 22,000
9 15,500 9 19,000
8 16,000 8 16,000
7 16,500 7 13,000
6 17,000 6 10,000
5 17,500 5 7,000
4 18,000 4 4,000
3 18,500 3 1,000
2 19,000 2 0
a. Graph the demand and supply functions for sweatshirts and find the equilibrium price and quantity.
b. What effect will an increase in the price of gym shoes (a complement) have on the equilibrium price and quantity of sweatshirts, all else constant? Illustrate the effect using your graph.
c. What effect will a wage increase for workers in the sweatshirt industry have on the equilibrium price and quantity of sweatshirts, all else constant? Illustrate the effect using your graph.
a. Equilibrium price and quantity are $8 and 16,000 units.
b. An increase in the price of gym shoes will cause the demand for sweatshirts to decrease, i.e., the demand curve for sweatshirts will shift left. The decrease in demand will result in a decrease in the equilibrium price and quantity of sweatshirts.
c. An increase in the wages of workers in the sweatshirt industry will lead to a decrease in the supply of sweatshirts, i.e., the supply curve will shift left. This will result in an increase in equilibrium price and a decrease in equilibrium quantity.
You might also like to view...
Which of the following did not help Thailand maintain its peg against the dollar in the 1990s?
A) borrowing dollars from the International Monetary Fund in exchange for baht B) foreigners selling off new investments in Thailand C) increasing domestic interest rates to attract more foreign investors D) buying baht on the foreign exchange market to support higher demand for the baht
The labor supply curve(s) will shift left if there is a decrease in wages.
Select whether the statement is true or false. A. True B. False
If a farmer's opportunity cost of producing 10,000 bushels of wheat is 5,000 fewer bushels of soybeans, then her opportunity cost of producing 5,000 bushels of soybeans must be 10,000 fewer bushels of wheat
a. True b. False Indicate whether the statement is true or false
Potential GDP refers to the level of
A) real GDP in the long run. B) nominal GDP in the long run. C) real GDP in the short run. D) nominal GDP in the short run.