Economics: Principles & Policy
Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Chapter 11, Problem 1TY

(a)

To determine

The social advantage of increasing the price of electric power when people use air conditioner during hot days.

(b)

To determine

The social advantage of the increase in the price of water in drought-stricken areas.

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Explain what the rationing problem is, and one strategy for dealing with it.
who benefits if the price is higher than the market price?
You will analyze the Market for Gasoline Step 1: Draw a supply-and-demand diagram. Price is on the vertical axis, quantity is on the horizontal axis, demand is downward-sloping, supply is upward- sloping, and be sure to label equilibrium price and equilibrium quantity. Step 2. Change colors! If you have a highlighter or colored pencil (crayon, sharpie, whatever). Step 3. Show the change in demand or supply (only one curve will shift in each scenario). State if the curve decreases or increases. Step 4: Show the new equilibrium price and equilibrium quantity. Step 5: Repeat Steps 1-4 for each scenario. You will have a total of 4 graphs. Scenario A: A hurricane destroys refineries that produce gasoline. Scenario B: Consumers purchase electric vehicles that do not need gasoline. • Scenario C: Technological innovation occurs that reduces the cost of producing gasoline. Scenario D: Road trips become the one and only vacation option and many families opt for long-distance road trips. ● .
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