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
EBK MICROECONOMICS
- 1. The table below shows a country's hypothetical national income and product accounts data. Category Consumption (personal consumption expenditures) Investment (gross private domestic investment) Government consumption (government expenditures) Exports Imports Net Factor Income from Abroad Net unilateral transfers Billions of Dollars 8,000 1,300 2,100 900 1,750 +45 -20 a. Compute the following accounts using the information in the table: Gross national expenditure (GNE) . Trade balance (TB) • Gross domestic product (GDP) • Gross national income (GNI) . Gross national disposable income (GNDI) Current account (CA) b. Derive the current account identity using the national income identity. Are savings greater than or smaller than investment in this country? The national income identity is: GNDIGNE + CA, GNE = C + G + I.arrow_forward4. Assume that a country produces an output Q of 50 every year. The world interest rate is 10%. Consumption C is 50 every year, and I = G = 0. There is an unexpected drop in output in year 0, so output falls to 28 and is then expected to return to 50 in every future year. If the country desires to smooth consumption, how much should it borrow in period 0? What will the new level of consumption be from then on?arrow_forward2. Show how each of the following would affect the following US balance of payments: trade balance (TB), net factor income abroad (NFIA), net unilateral transfers (NUT), financial account (FA), and capital account (KA). Identify which specific account is affected in each case (e.g., +$10 in TB). Note that the sum of the balance of payment accounts is zero. Example: A California computer manufacturer purchases a $50 hard disk from a Malaysian company, paying the funds from a bank account in Malaysia. Answer: The US imports a hard disk from Malaysia: TB = $50 The US draws a foreign asset to pay for the import (less external asset): FA = +$50. (Note: The balance of payment identity holds: CA + FA (+KA) = −- $50 + $50 = 0. No KA in this example.) a. A US tourist in Japan sells his iPod to a local resident for yen worth $100. (hint: A US tourist obtains Japanese currency.) b. A US owner of Honda shares receives $10,000 in dividend payments, which are paid into a Tokyo bank. c. The central…arrow_forward
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