(a): Explanation Figure -1 illustrates the change in equilibrium due to changing the supply and demand curve. Figure 1 and figure 2 illustrate how the fall in the price of flour affects the bagels and cream cheese markets. The vertical axis in figure1 represents the price of bagel and in figure 2 represents price of cream cheese. The horizontal axis in figure 1 represents the quantity demanded and supplied of bagel and in figure 2 represents the quantity demanded and supplied of cream cheese. From figure 1, it can be inferred that flour being an ingredient in bagel, we notice a fall in the price of flour (fall in input price) and that results in a rise in the supply of bagels which shift the supply curve of bagels to the right. The result is a fall in the equilibrium price of bagels with a rise in the equilibrium quantity . Since the bagels and cream cheese are complements, the fall in the price of bagels increases the demand for cream cheese... (b): To determine The change in input prices and its related effects in the market.

Bundle: Principles of Economics, Loose-leaf Version, 8th + LMS Integrated MindTap Economics, 2 terms (12 months) Printed Access Card

8th Edition

ISBN: 9781337607735

Author: N. Gregory Mankiw

Publisher: Cengage Learning

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Question

Chapter 4, Problem 10PA

(a):

To determine

Graphical illustration of change in equilibrium due to changing the supply and demand curve.

(b):

To determine

The change in input prices and its related effects in the market.

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Chapter 4 Solutions

Bundle: Principles of Economics, Loose-leaf Version, 8th + LMS Integrated MindTap Economics, 2 terms (12 months) Printed Access Card

Ch. 4.1 - Prob. 1QQ Ch. 4.2 - Prob. 2QQ Ch. 4.3 - Prob. 3QQ Ch. 4.4 - Prob. 4QQ Ch. 4 - Prob. 1CQQ Ch. 4 - Prob. 2CQQ Ch. 4 - Prob. 3CQQ Ch. 4 - Prob. 4CQQ Ch. 4 - Prob. 5CQQ Ch. 4 - Prob. 6CQQ

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Similar questions

Many changes are affecting the market for oil. Predict how each of the following events will affect the equilibrium price and quantity in the market for oil. In each case, state how the event will affect the supply and demand diagram. Create a sketch of the diagram if necessary. Cars are becoming more fuel efficient, and therefore get more miles to the gallon. The winter is exceptionally cold. A major discovery of new oil is made off the coast of Norway. The economies of some major oil-using nations, like Japan, slow down. A war in the Middle East disrupts oil-pumping schedules. Landlords install additional insulation in buildings. The price of solar energy falls dramatically. Chemical companies invent a new, popular kind of plastic made from oil.

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