(a)
When the imported bananas are infected with a deadly virus what happens to the demand and supply curve.
Explanation of Solution
A report says that the bananas that have been imported are infected with a deadly virus, this will lead to the shift of consumers towards other fruits available in the market. Hence, the demand for the bananas will be less which will shift the demand curve towards left.
In the given graph, D1 is the initial demand curve, S is the initial supply curve, Peq1 is the initial
Demand and supply are the basic concepts in economics, and they can vary depending on various factors. Demand can be defined as how much quantity of the product or service is demanded or can be availed by a customer.
Whereas Supply how much quantity of products or services is available in the market.
(b)
When the consumers' income drops or decreases what happens to the demand and supply curve.
Explanation of Solution
A fall in consumer income will reduce the demand as his disposable income, so demand curve shifts down, which in turn reduces the price of the product. In the given graph, D1 is the initial demand curve S is the initial supply curve, Peq1 is the initial price and Qeq1 is the initial quantity. Due to change in income demand curve shifts to the left to D2. Price Peq1 is same but demand come down i.e. Q3 which lower than Qeq1 creating a surplus in the market. This in turn shifts the price to a new equilibrium point e2 and price changes to Peq2.and quantity become Qeq2.
Demand and supply are the basic concepts in economics, and they can vary depending on various factors. Demand can be defined as how much quantity of the product or service is demanded or can be availed by a customer.
Whereas Supply how much quantity of products or services is available in the market.
(c)
When the price of banana rises what happens to the demand and supply curve.
Explanation of Solution
Demand is function of price and the quantity demanded. Hence, demand curve shifts when there is variation in the price and quantity demanded of the product. When price of banana rises quantity demanded will fall, which will create a surplus in the market.
Demand and supply are the basic concepts in economics, and they can vary depending on various factors. Demand can be defined as how much quantity of the product or service is demanded or can be availed by a customer.
Whereas Supply how much quantity of products or services is available in the market.
(d)
When the price of oranges falls what happens to the demand and supply curve.
Explanation of Solution
Oranges are a substitute to bananas. As the price of oranges fall, it causes a shift in the consumers preference. They start consuming more oranges than bananas. So, the quantity demanded for bananas fall and the demand curve of bananas shifts toward left reducing the price and consumption. Hence, at the new equilibrium point e2 price is reduced to Peq2 and quantity id reduced to Qeq2.
Demand and supply are the basic concepts in economics, and they can vary depending on various factors. Demand can be defined as how much quantity of the product or service is demanded or can be availed by a customer.
Whereas Supply how much quantity of products or services is available in the market.
(e)
When the consumers assume the price of bananas to fall in future what happens to the demand and supply curve.
Explanation of Solution
When consumers feel the price of bananas would fall in future, they would stop the consumption of bananas at the current price creating a surplus in the market. This would lead to reduction in price of the bananas. At the new point of
Demand and supply are the basic concepts in economics, and they can vary depending on various factors. Demand can be defined as how much quantity of the product or service is demanded or can be availed by a customer.
Whereas Supply how much quantity of products or services is available in the market.
Want to see more full solutions like this?
Chapter 3 Solutions
EBK MINDTAP ECONOMICS FOR BOYES/MELVIN'
- how to caculate verible cost?arrow_forwardWhat is the deficit?arrow_forwardIdentify the two curves shown on the graph, and explain their upward and downward slopes. Why does curve Aintersect the horizontal axis? What is the significance of quantity d? What does erepresent? How would the optimal quantity of information change if the marginal benefit of information increased—that is, if the marginal benefit curve shifted upward?arrow_forward
- 6. Rent seeking The following graph shows the demand, marginal revenue, and marginal cost curves for a single-price monopolist that produces a drug that helps relieve arthritis pain. Place the grey point (star symbol) in the appropriate location on the graph to indicate the monopoly outcome such that the dashed lines reveal the profit-maximizing price and quantity of a single-price monopolist. Then, use the green rectangle (triangle symbols) to show the profits earned by the monopolist. 18 200 20 16 16 14 PRICE (Dollars per dose) 12 10 10 8 4 2 MC = ATC MR Demand 0 0 5 10 15 20 25 30 35 40 45 50 QUANTITY (Millions of doses per year) Monopoly Outcome Monopoly Profits Suppose that should the patent on this particular drug expire, the market would become perfectly competitive, with new firms immediately entering the market with essentially identical products. Further suppose that in this case the original firm will hire lobbyists and make donations to several key politicians to extend its…arrow_forwardConsider a call option on a stock that does not pay dividends. The stock price is $100 per share, and the risk-free interest rate is 10%. The call strike is $100 (at the money). The stock moves randomly with u=2 and d=0.5. 1. Write the system of equations to replicate the option using A shares and B bonds. 2. Solve the system of equations and determine the number of shares and the number of bonds needed to replicate the option. Show your answer with 4 decimal places (x.xxxx); do not round intermediate calculations. This is easy to do in Excel. A = B = 3. Use A shares and B bonds from the prior question to calculate the premium on the option. Again, do not round intermediate calculations and show your answer with 4 decimal places. Call premium =arrow_forwardAnswer these questions using replication or the risk neutral probability. Both methods will produce the same answer. Show your work to receive credit. 6. What is the premium of a call with a higher strike. Show your work to receive credit; do not round intermediate calculations. S0 = $100, u=2, d=0.5, r=10%, strike=$150arrow_forward
- Answer these questions using replication or the risk neutral probability. Both methods will produce the same answer.arrow_forwardProblem 2: At a raffle, 2000 tickets are sold at $5 each for five prizes of $2000, $1000, $500, $250, and $100. You buy one ticket. What is the expected value of your gain? 1. Find the gain for each prize. 2. Write a probability distribution for the possible gains. 3. Find the expected value. 4. Interpret the results.arrow_forwardThis activity focuses on developing direct and supported opinions using various sources of information on the importance of the following topics: non-renewable and renewable energies, economic factors and obstacles that can affect the relationship between international trade and economic growth, devaluation of the currency in countries, and the imbalance of economic equity. In this context, it is essential that, when studying and developing these topics, students understand the concepts of the value of currencies and that leads to devaluation, non-renewable and renewable energy resources, economic development and obstacles, distribution of wealth, economic growth and external and internal constraints, and about international trade as a growth factor. Thus, the objectives that are intended to be achieved are the following: Acquire knowledge about the concepts mentioned above. Determine relationships between economic growth and international trade. Understand what some limitations that…arrow_forward
- Consider a firm facing conventional production technology. The short run Production Function has a small range of increasing marginal product (increasing marginal returns) and then is subject to the Law of Diminishing Marginal Product (diminishing marginal returns). A. Putting quantity on the horizontal axis and dollars on the vertical axis, depict three important curves: Fixed Cost (FC), Variable Cost (VC), and Total Cost (TC). (Note that we are not asking you to depict average cost functions!) B. Please clearly indicate on this graph the range of quantities where the firm is experiencing (1) increasing marginal product and (2) diminishing marginal product. C. In a few sentences, please justify why you've made this specific classification of increasing/diminishing marginal product in part (b).arrow_forwardplease answer the following questions: What is money, and why does anyone want it? Explain the concept of the opportunity cost of holding money . Explain why an increase in U.S. interest rates relative to UK interest rates would affect the U.S.-UK exchange rate. Suppose that a person’s wealth is $50,000 and that her yearlyincome is $60,000. Also suppose that her money demand functionis given by Md = $Y10.35 - i2Derive the demand for bonds. Suppose the interest rate increases by 10 percentage points. What is the effect on her demand for bonds?b. What are the effects of an increase in income on her demand for money and her demand for bonds? Explain in wordsarrow_forwardDriving Quiz X My Course G city place w x D2L Login - Univ X D2L Login - Univ x D2L Login - U acmillanlearning.com/ihub/assessment/f188d950-dd73-11e0-9572-0800200c9a66/4db68a5e-69bb-4767-8d6c-a12d +1687 pts /1800 © Macmillan Learning Question 6 of 18 > The graph shows the average total cost (ATC) curve, the marginal cost (MC) curve, the average variable cost (AVC) curve, and the marginal revenue (MR) curve (which is also the market price) for a perfectly competitive firm that produces terrible towels. Answer the three questions, assuming that the firm is profit-maximizing and does not shut down in the short run. What is the firm's total revenue? S What is the firm's total cost? $ What is the firm's profit? (Enter a negative number for a loss.) $ Price $320 $300 $200 $150 205 260 336 365 Quantity MC ATC AVC MR=Parrow_forward
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning