Consider the market for High-Definition television sets in an average town in America. a. Start in Equilibrium (be sure to label all relevant points) b. Change at least one of the ceteris paribus conditions. Now consider this market after 50 people from the town get together on some lottery tickets and win the $350 million prize. c. Examine the changed incentive. Which curve(s) has(have) changed? Why? (i.e. – which of the ceteris paribus conditions have changed?) ________________________________________________________ d. Identify the change(s) in direction, and draw into the above market. e. Finish in equilibrium. What are the effects on price and quantity?
Consider the market for High-Definition television sets in an average town in America. a. Start in Equilibrium (be sure to label all relevant points) b. Change at least one of the ceteris paribus conditions. Now consider this market after 50 people from the town get together on some lottery tickets and win the $350 million prize. c. Examine the changed incentive. Which curve(s) has(have) changed? Why? (i.e. – which of the ceteris paribus conditions have changed?) ________________________________________________________ d. Identify the change(s) in direction, and draw into the above market. e. Finish in equilibrium. What are the effects on price and quantity?
Chapter1: Making Economics Decisions
Section: Chapter Questions
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4. Consider the market for High-Definition television sets in an average town in America.
a. Start in Equilibrium (be sure to label all relevant points)
b. Change at least one of the ceteris paribus conditions. Now consider this market after 50 people from the town get together on some lottery tickets and win the $350 million prize.
c. Examine the changed incentive. Which curve(s) has(have) changed? Why? (i.e. – which of the ceteris paribus conditions have changed?) ________________________________________________________
d. Identify the change(s) in direction, and draw into the above market.
e. Finish in equilibrium. What are the effects on price and quantity?
Expert Solution
Step 1
In a free market, the equilibrium is attained by the forces of the demand and supply curve. The equilibrium point is the point of rest, that is, the point from which neither the buyer nor the consumer has any incentive to deviate. At the equilibrium price, quantity demanded is equal to quantity supplied. This implies that there is no excess demand or excess supply in the market at equilibrium point.
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