Microeconomics (6th Edition)
6th Edition
ISBN: 9780134106243
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 3, Problem 3.4.11PA
To determine
Perishable food market.
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8. Shifts in supply or demand I
The following graph shows the market for peanut butter in Miami, where there are over 1,000 stores that sell peanut butter at any given moment. Suppose the Surgeon General issues a public statement saying that consuming peanut butter is bad for your health.
Show the effect of this change on the market for peanut butter by shifting one or both of the curves on the following graph, holding all else constant.
Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.
DemandSupplyPRICE (Dollars per jar)QUANTITY (Jars)Demand Supply
Now suppose Congress passes a new tax that decreases the income of Miami residents.
If peanut butter is a normal good, this will cause the demand for peanut butter to .…
Supply and Demand
The law of demand and supply are important in business. The law of demand states that as price of a good or service increases, the quantity demand decreases and vice versa. While the law of supply states that as prices of goods and services increase, the quantity supplied increases. The law of demand is a good concept for businesses when setting prices. As businesses raise prices, consumers may buy less of the product because their incomes are mostly stagnant. For example, a parent may buy 4 loaves of bread at $2 each which is $8, but may decide to only buy 2 loaves of bread when the price of a loaf of bread increases to $4. This is because the parent’s income is stagnant and he or she has allocated only $8 for bread.
Discussion question
The law of demand states that as the price of a good or service increases, the quantity demanded goes down and vice-versa. Share an example of a good or service that follows the law of demand.
Give an example of goods or services…
The following graph shows the supply curve for sedans in an imaginary market. For simplicity, assume that all sedans are identical and sell for the
same price. Two factors that affect the supply of sedans are the level of technical knowledge in this case, the speed with which manufacturing robots
can fasten bolts, or robot speed-and the wage rate that auto manufacturers must pay their employees. Initially, the graph shows the supply curve
when robots can fasten 2,500 bolts per hour and autoworkers earn $25 per hour.
Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.
Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.
PRICE (Thousands of dollars)
50
40
30
20
O
Supply
0 100 200 300 400 500 600 700 800 900
QUANTITY (Sedans per month)
Graph Input Tool
Supply for Sedans
Price of a Sedan
(Thousands of
dollars)
Quantity Supplied
(Sedans…
Chapter 3 Solutions
Microeconomics (6th Edition)
Ch. 3 - Prob. 1TCCh. 3 - Prob. 2TCCh. 3 - Prob. 3.1.1RQCh. 3 - Prob. 3.1.2RQCh. 3 - Prob. 3.1.3RQCh. 3 - Prob. 3.1.4RQCh. 3 - Prob. 3.1.5RQCh. 3 - Prob. 3.1.6PACh. 3 - Prob. 3.1.7PACh. 3 - Prob. 3.1.8PA
Ch. 3 - Prob. 3.1.9PACh. 3 - Prob. 3.1.10PACh. 3 - Prob. 3.1.11PACh. 3 - Prob. 3.1.12PACh. 3 - Prob. 3.1.13PACh. 3 - Prob. 3.1.14PACh. 3 - Prob. 3.1.15PACh. 3 - Prob. 3.1.16PACh. 3 - Prob. 3.1.17PACh. 3 - Prob. 3.2.1RQCh. 3 - Prob. 3.2.2RQCh. 3 - Prob. 3.2.3RQCh. 3 - Prob. 3.2.4PACh. 3 - Prob. 3.2.5PACh. 3 - Prob. 3.2.6PACh. 3 - Prob. 3.2.7PACh. 3 - Prob. 3.2.8PACh. 3 - Prob. 3.2.9PACh. 3 - Prob. 3.3.1RQCh. 3 - Prob. 3.3.2RQCh. 3 - Prob. 3.3.3RQCh. 3 - Prob. 3.3.4PACh. 3 - Prob. 3.3.5PACh. 3 - Prob. 3.3.6PACh. 3 - Prob. 3.3.7PACh. 3 - Prob. 3.3.8PACh. 3 - Prob. 3.3.9PACh. 3 - Prob. 3.4.1RQCh. 3 - Prob. 3.4.2RQCh. 3 - Prob. 3.4.3PACh. 3 - Prob. 3.4.4PACh. 3 - Prob. 3.4.5PACh. 3 - Prob. 3.4.6PACh. 3 - Prob. 3.4.7PACh. 3 - Prob. 3.4.8PACh. 3 - Prob. 3.4.9PACh. 3 - Prob. 3.4.10PACh. 3 - Prob. 3.4.11PACh. 3 - Prob. 3.4.12PACh. 3 - Prob. 3.4.13PACh. 3 - Prob. 3.4.14PACh. 3 - Prob. 3.4.15PACh. 3 - Prob. 3.4.16PACh. 3 - Prob. 3.4.17PACh. 3 - Prob. 3.4.18PA
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- The following graph shows the supply curve for sedans in an imaginary market. For simplicity, assume that all sedans are identical and sell for the same price. Two factors that affect the supply of sedans are the level of technical knowledge—in this case, the speed with which manufacturing robots can fasten bolts, or robot speed—and the wage rate that auto manufacturers must pay their employees. Initially, the graph shows the supply curve when robots can fasten 2,500 bolts per hour and autoworkers earn $25 per hour. Suppose that the price of a sedan increases from $21,000 to $26,000. This would cause the quantity supplied of sedans to ________ (options: increase, decrease) , which is reflected on the graph by a ________ (options: shift of, movement along) the supply curve. Suppose the workers' union negotiates a pay raise. This causes a _________ (options: leftward movement along, rightward movement along, leftward shift of, rightward shift of) the supply curve because the pay raise…arrow_forwardAfter collecting many years of data on the price and quantity of wine sales, you decide to plot the data on a graph with quantity on the x-axis (horizontal axis) and price on the y-axis (vertical axis). The graph shows price and quantity increasing together over the period of your data, and that surprises you because that seems to violate the Law of Demand. You know that true violations of the Law of Demand are rare, though, so you begin to think about an alternative explanation for the pattern in the data. Draw a graph below that fits the description of the data above. (You can’t do this precisely since you don’t have data. Just draw a graph that “fits” the description.) Describe in words and incorporate on your graph a plausible explanation for the upward-sloping pattern in the data. Make sure your written explanation aligns with your graphical explanation.arrow_forwardA government report comes out saying that drinking tea daily has great health benefits. This will cause the price of tea to [Select] and the quantity of tea bought and sold to [Select]arrow_forward
- In 2018, economists were predicting that the demand for electric vehicles would rise in 2019, driving up the price of lithium. However, in 2019, this expected increase in demand did not happen. Lithium producers, however, changed their behavior based on these predictions. As a result the price for lithium in 2019 (rose,fell,remained the same) and the quantity of lithium (rose,fell,remained the same)arrow_forwardThink of a relevant example in your own life of how a change in the market (including information, preferences, technology, price of alternative goods, regulations, taxes, etc.) has shifted either the supply or demand of a good. How did this change affect the market equilibrium for that good or service? Explain. Next, find a relatively recent news article (within the past year) to support your finding (the news search feature in Google is helpful with this). If you cannot find an article specific to your example, you may find an article about another similar good or service. Summarize the article and its findings, then include the URL in your discussion post. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardFour students from your economics class are sitting in a local restaurant discussing the market for coffee. Below are quotes from each of the four students. All of the following quotes are logically correct except one. Which quote indicates incorrect economic analysis? A. Nicholas: "If Brazil is hit hard by such a severe freeze that half of its crop is wiped out, then the price of coffee will probably rise." B. Kendra: "If the price of caffeinated soft drinks such as Mountain Dew went down, then consumer demand for coffee would go down since they're substitutes for each other." C. Sergei: "If the demand for coffee were to increase, then I would expect the price to rise, which would then cause the demand to fall back down to its original position." D. Tasha: "If coffee drinkers expect the price of coffee to rise next month, then current demand will go up and lead to a price increase this month."arrow_forward
- Suppose that Carlos and Deborah are the only suppliers of pieces of cake in some hypothetical market. Their annual supply schedules are given by the following table: Carlos's Quantity Supplied Deborah's Quantity Supplied (Pieces) ITT 20 30 35 40 PRICE (Dollars per piece) (Dollars per piece) 5 Price 0 0 1 2 3 4 5 20 On the following graph, plot Carlos's supply of pieces of cake using the green points (triangle symbol). Next, plot Deborah's supply of pieces of cake using the purple points (diamond symbol). Finally, plot the market supply of pieces of cake using the orange points (square symbol). Note: Line segments will automatically connect the points. Remember to plot from left to right. (?) 40 60 80 QUANTITY (Pieces) 100 (Pieces) 120 20 40 55 65 70 Carlos's Supply Deborah's Supply O Market Supplyarrow_forwardOver the past 20 years, the average price of avocados has more than doubled. Assume that the price of avocados is determined by the forces of supply and demand. Using concepts that you have learned about supply and demand, explain whether the following is or is not a cause of the increase in price of avocado. Numerous studies have linked the consumption of avocados to healthier overall diets. The profits of avocado growers have increased over the past 20 yearsarrow_forwardSuppose one of your friends offered the following argument: a rightward shift in demand will cause an increase in price. The increase in price will cause a rightward shift of the supply curve, which will lead to an offsetting decrease in price. Therefore, it is impossible to tell what effect an increase in demand will have on price. Do you agree with your friend? If not, what is the flaw in your friend’s reasoning?arrow_forward
- You are advising Roy on the opening of his Original-Original Famous Pizzeria. By plotting the points below on a coordinate plane, you can show Roy the price points that would lead to a shortage of slices, a surplus of slices, and the point of maximum efficiency per slice. On the graph paper below: label your vertical axis with prices and your horizontal axis with quantity, plot each point of the demand and draw the curve with one color. plot each point of supply and draw the curve with a different color, identify the equilibrium point on your grapharrow_forwardWhat is a relevant example of how a change in the market (including information, preferences, technology, price of alternative goods, regulations, taxes, etc.) has shifted either the supply or demand of a good. How did this change affect the market equilibrium for that good or service? Explain. Next, find a relatively recent news article (within the past year) to support your finding (the news search feature in Google is helpful with this). If you cannot find an article specific to your example, you may find an article about another similar good or service. Talk about the article and its findings, then include the URL.arrow_forwardSuppose that more people have opened their own e-business because they wanted to be their own bosses, but the demand for e-products has grown even faster as the economy recovered from the pandemic. How would this affect the equilibrium price and quantity of meals sold by restaurants? (reperesnt this in graph)arrow_forward
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