Draw a graph of a market in equilibrium. Describe what might cause a change in demand or supply and how this would affect the diagram. Indicate how the equilibrium price and quantity will change.
What will be an ideal response?
The (completed) diagram should look like Figure 4-3 in the text. Effects that might change demand include a change in population, income of buyers, tastes, and prices of related goods (substitutes and complements). Effects that might change supply include the size of the industry (entry or exit of new firms), technological progress, prices of inputs, and prices of related goods.
You might also like to view...
Each identical consumer has the following demand for golf, q = 100 - p, where q is the number of rounds of golf played per year and p is the price per round. The only golf course in an isolated town incurs a marginal cost of $10 per round of golf
It wishes to charge a membership fee and a fee per round of golf. What price will it set for each fee?
What would be an optimal tax on pollution (a negative externality)?
a) one for which producers internalize the cost of the pollution b) one for which a benevolent social planner is able to maximize production c) one for which producers choose not to produce any pollution d) one for which the value to consumers at market equilibrium exceeds the cost of production (including tax)
A decline in the price of resource A will:
A. increase the demand for complementary resource B. B. shift the demand curve for A to the left. C. shift the demand curve for A to the right. D. reduce the demand for complementary resource B.
Specialization is the concept of devoting resources to the production of only a small number of goods and services
a. True b. False Indicate whether the statement is true or false