Subpart (a):
Demand and supply.
Subpart (a):
Answer to Problem 4P
Explanation of Solution
When the supply decreases with constant demand curve, it will lead to a decrease in the
Figure -1
In Figure -1, the horizontal axis measures the quantity supplied and the vertical axis measures the price of the balls. ‘DD’ represents the demand and the demand curve shifts from DD to DD1; ‘SS’ represents the supply curve and the supply curve shifts from SS to SS1. Decrease in supply will lead to a decrease in the equilibrium quantity from ‘Q1 to Q2’ and an increase in the equilibrium price from ‘P1 to P2’.
Concept introduction:
Demand: Demand refers to the total value of the goods and services that are demanded at a particular price in the given period of time.
Supply: Supply refers to the total value of the goods and services that are available for purchase at a particular price in the given period of time.
Subpart (b):
Demand and supply.
Subpart (b):
Answer to Problem 4P
Price shifts down and quantity shifts down – b.
Explanation of Solution
When the demand decreases with constant supply curve, it will lead to a decrease in the equilibrium quantity and equilibrium price. This is shown below in Figure -2:
Figure -2
In Figure -2, the horizontal axis measures the quantity supplied and the vertical axis measures the price of the balls. ‘DD’ represents the demand and the demand curve shifts to the left from DD to DD1; ‘SS’ represents the supply curve. Decrease in supply will lead to a decrease in the equilibrium quantity from ‘Q1 to Q2’ and the equilibrium price from ‘P1 to P2’.
Concept introduction:
Demand: Demand refers to the total value of the goods and services that are demanded at a particular price in the given period of time.
Supply: Supply refers to the total value of the goods and services that are available for purchase at a particular price in the given period of time.
Subpart (c):
Demand and supply.
Subpart (c):
Answer to Problem 4P
Price shifts down and quantity shifts up – c.
Explanation of Solution
When the demand is constant with an increase in the supply curve, it will lead to a decrease in the equilibrium price and an increase in the equilibrium quantity. This is shown below in Figure -3:
Figure -3
In Figure -3, the horizontal axis measures the quantity supplied and the vertical axis measures the price of the balls. ‘DD’ represents the demand and ‘SS’ represents the supply curve and the supply curve shifts to the right from SS to SS1. Increase in supply will lead to a decrease in the equilibrium price from ‘P1 to P2’ and an increase in the equilibrium quantity from ‘Q1 to Q2’.
Concept introduction:
Demand: Demand refers to the total value of the goods and services that are demanded at a particular price in the given period of time.
Supply: Supply refers to the total value of the goods and services that are available for purchase at a particular price in the given period of time.
Subpart (d):
Demand and supply.
Subpart (d):
Answer to Problem 4P
Price will indeterminate and quantity shifts up – d.
Explanation of Solution
When both the demand and supply increases, it will lead to an increase in the equilibrium quantity and the change in price is indeterminate. This is because an increase in the supply puts a downward pressure on the equilibrium price. This is shown below in Figure – 4:
Figure -4
In Figure -4, the horizontal axis measures the quantity supplied and the vertical axis measures the price of the balls. ‘DD’ represents the demand curve and ‘SS’ represents the supply curve. Due to the increase in supply and demand, the supply curve shifts to the right from SS to SS1 and the demand curve shifts from DD to DD1. An increase in the supply leads to an increase in the equilibrium price from ‘P1 to P2’ and the equilibrium quantity from ‘Q1 to Q2’.
Concept introduction:
Demand: Demand refers to the total value of the goods and services that are demanded at a particular price in the given period of time.
Supply: Supply refers to the total value of the goods and services that are available for purchase at a particular price in the given period of time.
Subpart (e):
Demand and supply.
Subpart (e):
Answer to Problem 4P
Price shifts up and quantity shifts up – e.
Explanation of Solution
If the demand increases with constant supply, it leads to an increase in the equilibrium quantity and equilibrium price. This is shown below in Figure – 5:
Figure -5
In Figure -5, the horizontal axis measures the quantity supplied and the vertical axis measures the price of the balls. ‘DD’ represents the demand curve and ‘SS’ represents the supply curve. Due to an increase in demand, the demand curve will shift the curve to the right from DD to DD1. An increase in demand will increase the equilibrium price from ‘P1 to P2’ and increases the equilibrium quantity from ‘Q1 to Q2’.
Concept introduction:
Demand: Demand refers to the total value of the goods and services that are demanded at a particular price in the given period of time.
Supply: Supply refers to the total value of the goods and services that are available for purchase at a particular price in the given period of time.
Subpart (f):
Demand and supply.
Subpart (f):
Answer to Problem 4P
Price shifts down and quantity indeterminate – f.
Explanation of Solution
If the supply increases with a decrease in demand, it leads to a decrease in the equilibrium price because both the curves put a pressure on the equilibrium price. Thus, an increase in supply increases the equilibrium quantity and a decrease in demand lead to a decrease in the equilibrium quantity. This is shown below in Figure – 6:
Figure -6
In Figure -6, the horizontal axis measures the quantity supplied and the vertical axis measures the price of the balls. ‘DD’ represents the demand curve and ‘SS’ represents the supply curve. Due to a decrease in demand and an increase in supply, demand curve will shift the curve to the left from DD to DD1. An increase in supply will lead to an increase in the equilibrium quantity from ‘P1 to P2’ and increases the equilibrium quantity from ‘Q1 to Q2’.
Concept introduction:
Demand: Demand refers to the total value of the goods and services that are demanded at a particular price in the given period of time.
Supply: Supply refers to the total value of the goods and services that are available for purchase at a particular price in the given period of time.
Subpart (g):
Demand and supply.
Subpart (g):
Answer to Problem 4P
Price shifts up and quantity indeterminate – g.
Explanation of Solution
If the supply decreases with an increase in demand, it will lead to an increase in the equilibrium price because both the curve put a pressure on the equilibrium price. An increase in demand will lead to an increase in the equilibrium quantity. This is shown below in Figure – 7:
Figure -7
In Figure -7, the horizontal axis measures the quantity supplied and the vertical axis measures the price of the balls. ‘DD’ represents the demand and ‘SS’ represents the supply curve. Due to a decrease in supply and an increase in demand, the supply curve will shift the curve to the left from SS to SS1 and the demand curve shifts the curve to the right, which leads to an increase in the equilibrium price from ‘P1 to P2’ and the equilibrium quantity from ‘Q1 to Q2’.
Concept introduction:
Demand: Demand refers to the total value of the goods and services that are demanded at a particular price in the given period of time.
Supply: Supply refers to the total value of the goods and services that are available for purchase at a particular price in the given period of time.
Subpart (h):
Demand and supply.
Subpart (h):
Answer to Problem 4P
Price indeterminate and quantity shifts down – h.
Explanation of Solution
If both the supply and demand decreases, then it lead to a decrease in the equilibrium quantity and the change in equilibrium price is indeterminate. This is because a decrease in supply puts an upward pressure on the equilibrium price. This is shown below in Figure – 8:
Figure -8
In Figure -8, the horizontal axis measures the quantity supplied and the vertical axis measures the price of the balls. ‘DD’ represents the demand and ‘SS’ represents the supply curve. Due to a decrease in supply and a decrease in demand, the supply curve will shift the curve to the left from SS to SS1 and the demand curve shifts the curve to the left, which lead to an increase in the equilibrium price from ‘P1 to P2’ and a decrease in the equilibrium quantity from ‘Q1 to Q2’.
Concept introduction:
Demand: Demand refers to the total value of the goods and services that are demanded at a particular price in the given period of time.
Supply: Supply refers to the total value of the goods and services that are available for purchase at a particular price in the given period of time.
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Chapter 3 Solutions
Macroeconomics: Principles, Problems, & Policies
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- 13. In a paragraph, no bullet, points please answer the question and follow the instructions. Give only the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. Where does the government get its funds that it spends? What is the difference between federal debt and federal deficit?arrow_forward11. In a paragraph, no bullet, points please answer the question and follow the instructions. Give only the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. Why is determining the precise interest rate target so difficult for the Fed?arrow_forwardProblem 1 Regression Discontinuity In the beginning of covid, the US government distributed covid stimulus payments. Suppose you are interested in the effect of receiving the full amount of the first stimulus payment on the total spending in dollars by single individuals in the month after receiving the payment. Single individuals with annual income below $75,00 received the full amount of the stimulus payment. You decide to use Regression Discontinuity to answer this question. The graph below shows the RD model. 3150 3100 3050 Total Spending in the month after receiving the stimulus payment 2950 3000 74000 74500 75000 75500 76000 Annual income a. What is the outcome? (5 points) b. What is the treatment? (5 points) C. What is the running variable? (5 points) d. What is the cutoff? (5 points) e. Who is in the treatment group and who is in the control group? (10 points) f. What is the discontinuity in the graph and how do you interpret it? (10 points) g. Explain a scenario which can…arrow_forward
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