2. Good X is produced in a competitive market using input A. Explain what would happen to the supply of good X in each of the following situations: a. The price of input A increases. b. An excise tax of $1 is imposed on good X Demand and Supply c. An ad valorem tax of 5 percent is imposed on good X. d. A technological change reduces the cost of producing additional units of good X 62

How does one analyze a market where both demand and supply shift?

Table 3.9 illustrates the markets demand and supply for cheddar cheese. Graph the data and find the equilibrium. Next, create a table showing the change in quantity demanded or quantity supplied, and a graph of the new equilibrium, in each of the following situations: The price of milk, a key input for cheese production, rises, so that the supply decreases by 80 pounds at every price. A new study says that eating cheese is good for your health, so that demand increases by 20 at every price.