7.3 please explain # 7.3. Comparative Statics: Price and Quantity EffectsConsider the following events and their respective markets:- **Event:** OPEC reduces oil output. **Market:** Oil.- **Event:** Unusually rainy winter in New York City. **Market:** Umbrellas in NYC.- **Event:** Soccer Champions League final in Madrid. **Market:** Madrid hotels.- **Event:** Unusually low catch of sole fish. **Market:** Sole fish.## Figure 7.20 Analysis### Description:The figure titled "Copper: price and output, 1900–2010," sourced from the US Geological Survey, illustrates two variables over time: the price of copper and its output.### Graph Details:- **X-Axis (Horizontal):** Represents the year, ranging from 1900 to 2010.- **Y-Axis (Left Vertical):** Represents the price, measured in 10^3 $/mt (thousand dollars per metric ton).- **Y-Axis (Right Vertical):** Represents the output, measured in 10^6 metric tons (million metric tons). ### Data Representation:- **Blue Line:** Indicates the price of copper. It shows significant fluctuations over the years, with notable peaks and valleys.- **Red Line:** Represents the output of copper. It shows a more gradual increase over the years, indicating a rise in production.### Discussion Point:The image asks which of these events and markets corresponds to the four cases considered in Figure 7.10. ## Figure 7.10: Price Effect and Output Effect in Competitive MarketsThis figure illustrates the price effect and output effect in competitive markets through shifts in demand and supply curves. It consists of four panels, each demonstrating different scenarios of elasticity in supply and demand.### Top Panels: Shift in Demand- **Left Panel: Price Sensitive Supply** - The supply curve (S) is upward sloping, and there are two demand curves: an initial demand curve (D₁) and a shifted demand curve (D₂). - The shift from D₁ to D₂ increases both the equilibrium price (Δp) and the quantity (Δq).- **Right Panel: Rigid Supply** - The supply curve is vertical, indicating rigid supply. - A shift from the demand curve D₁ to D₂ results in a change in price (Δp) but no change in quantity (Δq).### Bottom Panels: Shift in Supply- **Left Panel: Price Sensitive Demand** - The demand curve (D) is downward sloping, and there are two supply curves: an initial supply curve (S₁) and a shifted supply curve (S₂). - The shift from S₁ to S₂ affects both the equilibrium price (Δp) and the quantity (Δq).- **Right Panel: Rigid Demand** - The demand curve is vertical, indicating rigid demand. - A shift in the supply curve from S₁ to S₂ results in a change in quantity (Δq) but no change in price (Δp).These diagrams demonstrate the differing impacts on price and quantity depending on whether demand or supply is flexible or rigid. Understanding these concepts is crucial for analyzing how competitive markets respond to changes in demand and supply conditions.

Demand refers to the quantity of a good or service that consumers are willing and able to purchase…

17.3. Comparative statics: price and quantity effects. Consider following events and markets: • Event: OPEC reduces oil output. Market: oil. • Event: Unusually rainy winter in New York City. Market: um- brellas in NYC. • Event: Soccer Champions League final in Madrid. Market: Madrid hotels. • Event: Unusually low catch of sole fish. Market: sole fish.

17.3. Comparative statics: price and quantity effects. Consider following events and markets: • Event: OPEC reduces oil output. Market: oil. • Event: Unusually rainy winter in New York City. Market: um- brellas in NYC. • Event: Soccer Champions League final in Madrid. Market: Madrid hotels. • Event: Unusually low catch of sole fish. Market: sole fish.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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