Chapter 5
Problem Set 4
Supply and Demand
Double Shifts
Answers

Four goods are provided.

Assume the market for each good is initially in equilibrium

After each good two statements are given; one relates to supply and one relates to demand.  These will cause the curves to shift and will give a new equilibrium point.

You are to say which will happen to the price and to the quantity (up, down or indeterminable) at the new equilibrium point.

Good: textbooks

• Fewer students are entering college

Demand shifts left P goes down, Q goes down

• Price of wood pulp increases

Supply shifts left P goes up, Q goes down

P indeterminable
Q down

 

Good:  tuna (normal good)

• Incomes increase

Demand shifts right P goes up, Q goes up

• Government increases quotas on all imported tuna.

Supply shifts left P goes up, Q goes down

P up
Q indeterminable

Good:  goosedown parkas

• Consumer anticipate an unusually warm winter.

Demand shifts left P goes down Q goes down

• Mysterious disease kills off geese.

Supply shifts left P goes up, Q goes down

P indeterminable
Q down

Good:  prefab furniture (normal good)

• Students part time incomes increase

Demand shifts right P goes up, Q goes up

• Wages in the particle board industry decline

Supply shifts right P goes down, Q goes up

P is indeterminable

Q goes up

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