Chapter 5
Problem Set 3
Supply and Demand
Assume initially the market for each good is in equilibrium.
A statement is given which will
change the original equilibrium because it will shift
either
demand or supply.
You are to find what will happen to
both price and quantity (up or down) under this new equilibrium.
Good: ice cream
-
The price of frozen yogurt increases in
price.
Good: PC
computers
-
New innovation reduces the production costs
of monitors.
Good: dairy
products
-
The government increases subsidies to dairy
farmers.
Good: golf clubs
-
Fee for playing on all public greens triples.
The following 5 questions deals with
DVD players.
Assume that the market begins in equilibrium.
-
The Federal government imposes quotas on all imported
DVD players.
-
The price of DVD discs declines.
-
Four manufacturers of DVD players build new factories in
the U.S.
-
Recording artists demand a doubling of all royalties
-
Napster is allowed to continue
operations.
The following seven question relate to
sports
utility vehicles (SUVs).
Assume
the market beings in equilibrium. Also assume that SUVs get poor
fuel mileage and gasoline is a complementary good.
-
People show a preference for SUVs
over other types of vehicles.
-
The cost of labor employed in the
automotive industry increases.
-
Consumer study finds that SUVs are
much less safe than sedans.
-
The cost of gasoline increases.
-
The Federal government implements
new safety feature regulations on all SUVs
-
Quotas are removed from imported
SUVs.
-
Prices for all new SUVs are expected
to increase within 2 months.
**********
The following 3 questions relate to
Pizza
Hut pizzas.
-
The price for Dominios pizzas
increases by 20%.
-
The government removes all
subsidies for dairy products.
-
Your income rises. You
consider Pizza Hut pizza as an inferior good.
[BACK to exercises]